English unjust enrichment law
Encyclopedia
English unjust enrichment law is a developing area of law
in unjust enrichment
. Traditionally, work on unjust enrichment has been dealt with under the title of "restitution
". Restitution is a gain-based remedy, the opposite of compensation
, as a loss-based remedy. But the event it responds to is the "unjust enrichment" of one person at the expense of another.
. Unjust enrichment, and the duty to reverse unjust enrichment, operates regardless of awareness. You are strictly liable to reverse it. However, unlike in conversion, there is always a "change of position" defence available. If you (unaware that you now have £10 too much in your wallet) go and consume £10 worth of chocolate, which you would not have done had you not had that extra £10, your position has changed. If I were to demand my £10 back, you could legitimately say, "but then I would be worse off, and that is unfair". This is the change of position
defence.
argued could be unified under one principle of a basis of a right being absent) which may ground a claim of restitution for unjust enrichment.
changed his mind in his second edition of Unjust Enrichment (2005) in the Clarendon Law Series, and argued that the continentals had got it right.
The two leading theorists that have revived unjust enrichment were Lord Goff, who produced Goff and Jones on Restitution and Professor Peter Birks
.
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
in unjust enrichment
Unjust enrichment
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.Definition:...
. Traditionally, work on unjust enrichment has been dealt with under the title of "restitution
Restitution
The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court...
". Restitution is a gain-based remedy, the opposite of compensation
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
, as a loss-based remedy. But the event it responds to is the "unjust enrichment" of one person at the expense of another.
Framework of claim
A core example (whatever the theoretical analysis) is a mistaken payment. If we have a contract for a book, and the deal is it costs £10, but when you give me the book I mistakenly give you a £20 note, you have been unjustly enriched. If it was the case that you realised I gave you £10 too much, then you have committed the tort of conversionConversion (law)
Conversion is a common law tort. A conversion is a voluntary act by one person inconsistent with the ownership rights of another. It is a tort of strict liability...
. Unjust enrichment, and the duty to reverse unjust enrichment, operates regardless of awareness. You are strictly liable to reverse it. However, unlike in conversion, there is always a "change of position" defence available. If you (unaware that you now have £10 too much in your wallet) go and consume £10 worth of chocolate, which you would not have done had you not had that extra £10, your position has changed. If I were to demand my £10 back, you could legitimately say, "but then I would be worse off, and that is unfair". This is the change of position
Change of position
Change of position is a defence to a claim in unjust enrichment, or for restitution. Ordinarily, someone who has been unjustly enriched at the expense of another is strictly liable to disgorge his gains...
defence.
- Kelly v Solari (1841) 9 M&W 54
- Lipkin Gorman v Karpnale LtdLipkin Gorman v Karpnale LtdLipkin Gorman v Karpnale Ltd [1991] 2 AC 548 is a foundational English unjust enrichment case. The House of Lords unanimously established that the basis of an action for money had and received is the principle of unjust enrichment, and that an award of restitution is subject to a defence of change...
Unjust(ified)
‘It is evident that in these situations the strict liability from which we recoil is actually the only acceptable regime. The reason is that the [demand for a repayment of windfall gain] does not aim to make you bear a loss or to inflict a deterrent punishment on you. Strong facts are needed to justify unpleasant outcomes of that kind which will leave you worse off. The [enrichor] is not trying to make you worse off. He seeks only that you should give up the gain obtained at the shop’s expense.’ (Birks, 7)ministerial receipt
Another available defence is ministerial receipt, i.e. the recipient defendant receives the assets as agent for another.Bona Fide Purchaser
It means that good value is given for receipt of assets without notice of breach of trust. It is a complete defence to any knowing receipt claim.Unjust(ified) factors
Other than mistakes, a variety of categories of "unjust factors" are said to generate unjust enrichment situations. Undue influence, duress, incapacity and illegality are examples of vitiating factors in contract. Contract law's analysis has been used to explain why courts do not uphold contracts in these situations. These are cases of unjust enrichment. The following eleven categories are examples of "unjust factor" (or what Peter BirksPeter Birks
Peter Birks QC was the Regius Professor of Civil Law at the University of Oxford from 1989 until his death. He was a Fellow of All Souls College, Oxford. He earned an LLM at University College, London...
argued could be unified under one principle of a basis of a right being absent) which may ground a claim of restitution for unjust enrichment.
Failure of consideration
- Lamplugh v BrathwaiteLamplugh v BrathwaiteLampleigh v Braithwait [1615] , Hobart 105, 80 ER 255 is a case on implied assumpsit and past consideration in English contract law.-Facts:...
(1615) Hobart 105, 80 ER 255 - Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] 2 All E.R. 122, on frustration
Mistakes
- Dextra Bank & Trust Company Limited v Bank of JamaicaDextra Bank & Trust Company Limited v Bank of JamaicaDextra Bank & Trust Company Limited v Bank of Jamaica [2002] is a recent and important case in unjust enrichment in the Privy Council.-Facts:...
[2002] UKPC 50
Misrepresentation
- Erlanger v New Sombrero Phosphate CoErlanger v New Sombrero Phosphate CoErlanger v New Sombrero Phosphate Co 3 App Cas 1218 is a landmark English contract law, restitution and UK company law case. It concerned rescission for misrepresentation and how the impossibility of counter restitution may be a bar to rescission...
(1878) 3 App Cas 1218, on misrepresentation
Undue influence
- Allcard v SkinnerAllcard v SkinnerAllcard v Skinner 36 Ch D 145 is an English contract law case dealing with undue influence. It is one of the leading cases in the area and in English unjust enrichment law.-Facts:...
(1887) 36 Ch D 145
Incapacity
- Companies Act 2006Companies Act 2006The Companies Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules but it has since...
ss 39-40
- Hazell v. Hammersmith and Fulham LBC [1992] 2 AC 1. Banks paid councils a lump sum (for Islington, £2.5m). The councils then paid the banks back at the prevailing interest rate. Banks paid councils back a fixed interest rate (this is the swap part). The point was that councils were gambling on what interest rates would do. So if interest rates fell, the councils would win. As it happened, interest rates were going up and the banks were winning. Islington was due to pay £1,354,474, but after Hazell, it refused, and waited to see what the courts said. At first instance Hobhouse J said that because the contract for the swap scheme was void, the council had been unjustly enriched with the lump sum (£2.5m) and it should have to pay compound interest (lots) rather than simple interest (lots, but not so much). But luckily for local government, three law Lords held that Islington only needed to repay with simple interest. There was no jurisdiction for compound interest. They said this was because there was no ‘resulting trust’.
- Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, the council had no authority to enter into a complex swap transaction with the German bank. So the House of Lords held that the council should repay the money they had been lent and a hitherto unknown ‘unjust’ factor was added to the list. Birks argued that the better explanation in all cases is an ‘absence of basis’ for the transfer of property. Searching through or adding to a list of open ended unjust factors simply concludes on grounds of what one wishes to prove, grounds that ‘would have to be constantly massaged to ensure that they dictated an answer as stable as is reached by the shorter ‘non basis’ route.’ (Birks (2005) 113)
- Banque Financiere de la Cite v. Parc (Battersea) Ltd [1999] 1 AC 221
- Deutsche Morgan Grenfell plc v IRC [2006] UKHL 49 at [26] Money was paid as tax under a statutory regime, which the ECJ later held to have infringed the EC Treaty. The House of Lords held that a claim could be made on grounds of a ‘mistake as to the law’. Professor Charles Mitchell prefers the reasoning of Park J at first instance, which recognised that there is not really a ‘mistake’ in terms of an ‘impairment of a claimant’s actual thought processes’. Lord Hoffmann recognised it only implicitly at [32].
Foreign comparisons
Unjust enrichment is a developed and coherent field in continental civil law systems. Continental lawyers say someone is unjustly enriched when there is no basis for their possession or title to some right or property. A more correct way of saying it is that someone has been "unjustifiedly enriched". In German, the term is Ungerechtfertigte Bereicherung (§812 BGB) and in France the term is Enrichissement sans cause. English lawyers, however, have been accustomed to identify an "unjust factor". The difference between "unjust factors" and "absence of basis" as a unifying principle has generated a lot of debate, particularly since Peter BirksPeter Birks
Peter Birks QC was the Regius Professor of Civil Law at the University of Oxford from 1989 until his death. He was a Fellow of All Souls College, Oxford. He earned an LLM at University College, London...
changed his mind in his second edition of Unjust Enrichment (2005) in the Clarendon Law Series, and argued that the continentals had got it right.
The two leading theorists that have revived unjust enrichment were Lord Goff, who produced Goff and Jones on Restitution and Professor Peter Birks
Peter Birks
Peter Birks QC was the Regius Professor of Civil Law at the University of Oxford from 1989 until his death. He was a Fellow of All Souls College, Oxford. He earned an LLM at University College, London...
.
See also
- Dextra Bank & Trust Company Limited v Bank of JamaicaDextra Bank & Trust Company Limited v Bank of JamaicaDextra Bank & Trust Company Limited v Bank of Jamaica [2002] is a recent and important case in unjust enrichment in the Privy Council.-Facts:...
- Peter BirksPeter BirksPeter Birks QC was the Regius Professor of Civil Law at the University of Oxford from 1989 until his death. He was a Fellow of All Souls College, Oxford. He earned an LLM at University College, London...
- American Law InstituteAmerican Law InstituteThe American Law Institute was established in 1923 to promote the clarification and simplification of American common law and its adaptation to changing social needs. The ALI drafts, approves, and publishes Restatements of the Law, Principles of the Law, model codes, and other proposals for law...
, Restatement of Restitution (1937) - Restitution for wrongs
- RestitutionRestitutionThe law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court...