Structure and Justification in Private Law: Essays for Peter Birks

STRUCTURE AND J USTIFICATION IN PRIVATE LAW Peter Birks’s tragically early death, and his immense influence around the w...

Author: Charles Rickett | Ross Grantham

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STRUCTURE AND J USTIFICATION IN PRIVATE LAW Peter Birks’s tragically early death, and his immense influence around the world, led immediately to the call for a volume of essays in his honour by scholars who had known him as a colleague, teacher and friend. One such volume, published in 2006, contained essays largely from scholars working in England (Mapping the Law: Essays in Memory of Peter Birks, edited by Andrew Burrows and Lord Rodger). This volume contains the essays of those outside England who chose to honour Peter, and appears later than the English volume, reflecting the far-flung habitations of its authors. The essays contained in this volume are focused around the law of unjust enrichment, but are not narrowly preoccupied—instead they move freely from unjust enrichment to some of the most profound questions in private law concerning taxonomy, the relationship between contract, property and unjust enrichment, and the place of remedies within private law. This volume, featuring the work of some of the world’s great private lawyers, provides a fitting tribute to a great scholar and a series of thoughtprovoking essays inspired by his example.

Structure and Justification in Private Law Essays for Peter Birks

Edited by Charles Rickett and Ross Grantham

Oxford and Portland, Oregon 2008

Published in North America (US and Canada) by Hart Publishing c/o International Specialized Book Services 920 NE 58th Avenue, Suite 300 Portland, OR 97213-3786 USA Tel: +1 503 287 3093 or toll-free: (1) 800 944 6190 Fax: +1 503 280 8832 E-mail: [email protected] Website: www.isbs.com © The editors and contributors 2008 The editors and contributors have asserted their right under the Copyright, Designs and Patents Act 1988, to be identified as the authors of this work. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission of Hart Publishing, or as expressly permitted by law or under the terms agreed with the appropriate reprographic rights organisation. Enquiries concerning reproduction which may not be covered by the above should be addressed to Hart Publishing at the address below. Hart Publishing, 16C Worcester Place, Oxford, OX1 2JW Telephone: +44 (0)1865 517530 Fax: +44 (0) 1865 510710 E-mail: [email protected] Website: http//:www.hartpub.co.uk British Library Cataloguing in Publication Data Data Available ISBN: 978-1-84113-807-7

Typeset by Forewords, Oxford Printed and bound in Great Britain by TJ International Ltd, Padstow, Cornwall

Preface PREFACE

Peter Birks’s tragically early death led immediately to the question of a Festschrift in his honour. Such was this fine scholar’s influence and impact that it was obvious that no method existed of binding a volume large enough to hold the essays of all who would wish to contribute, or ought to be asked to contribute. Accordingly, Andrew Burrows and Alan Rodger took upon themselves the task of organising a volume with contributions largely from scholars working in England. That volume appeared as Mapping the Law: Essays in Honour of Peter Birks, published by Oxford University Press in 2006. Andrew Burrows contacted me and suggested that I might like to undertake the preparation of a volume of essays by those outside England, Scotland and Germany who might wish to honour Peter. I jumped at this invitation. Peter was my first law teacher when I went up to Brasenose College, Oxford in 1972. In many ways, he was responsible for my choosing a career in academic life, and he became my friend as well as my mentor. I decided to ask my colleague and co-author in most of my own work in the law of restitution, Ross Grantham, to join me as co-editor. He too was a student of Peter’s, having studied for the BCL, and jumped at the chance to honour him. This book is that promised volume. It appears later than the English volume, perhaps reflective of the far-flung habitations of its authors, but it is, I am sure you will agree, as worthy a tribute to a great lawyer, scholar and mentor. Richard Hart’s readiness to come on board and to undertake the volume’s publication is much appreciated by all the contributors, and especially by Ross and me, and is a mark of the deep respect Richard also had for Peter. I thank Julie Collins of the administrative staff at the TC Beirne School of Law for her assistance in compiling the tables of cases and statutes; and Joy Maina, a PhD student at the School, who assisted with reference checking. I also thank Andrew Burrows, Alan Rodger and Oxford University Press for permission to reproduce in this volume the list of Peter’s publications that appeared in Mapping the Law, and to the compiler of that list, Eric Descheemaeker, for providing us with several small corrections, which have been duly incorporated. Last, but by no means least, I thank sincerely all the contributors for their hard work, goodwill and commitment to the project. Whether or not you were personally taught by Peter in a formal way, he would have been

vi

Preface

delighted by the display of these qualities! Principi iure peritissimo, magistro, amico! Fuer einen grossen Geist, Mentor, und Freund. Charles Rickett Queen’s Birthday, Queensland 11 June 2007

Contents CONTENTS

Preface List of Contributors Table of Cases Table of Legislation

v ix xi xxvii

1

Ross Grantham and Charles Rickett: In Memoriam – Professor Peter Birks

1

2

Ross Grantham and Charles Rickett: Unjust Enrichment – Reason, Place and Content

5

Part 1 – Why Restitution? 3

Ernest Weinrib: The Normative Structure of Unjust Enrichment

21

4

Kit Barker: Responsibility for Gain: Unjust Factors or Absence of Legal Ground? Starting Points in Unjust Enrichment Law

47

Part 2 – The Place of Unjust Enrichment in the Private Law 5

Mitchell McInnes: Taxonomic Lessons for the Supreme Court of Canada

77

6

Emily Sherwin: Legal Positivism and the Taxonomy of Private Law 103

7

Richard Sutton: Restitution and the Discourse of System

8

Hanoch Dagan: Legal Realism and the Taxonomy of Private Law 147

9

Stephen Waddams: Contract and Unjust Enrichment: Competing Categories, or Complementary Concepts?

10 Daniel Friedmann: The Creation of Entitlements through the Law of Restitution

127

167 185

11 Steve Hedley: The Shock of the Old: Interpretivism in Obligations 205 Part 3 – Issues in the Law of Unjust Enrichment 12 Peter Butler: Advance Contractual Payments: Enforcement and Restitution for Failure of Basis

225

13 Struan Scott: Mistaken Improvers and a Recognisable Law of Unjust Enrichment

245

14 Simone Degeling: Understanding Policy-motivated Unjust Factors 267 15 John McCamus: Restitutionary Liability of Public Authorities in Canada

291

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Contents

16 Mark P Gergen: Towards Understanding Equitable Estoppel

319

17 Michael Bryan: Recipient Liability under the Torrens System: Some Category Errors

339

18 Peter Watts: Birks and Proprietary Claims, with Special Reference to Misrepresentation and to Ultra Vires Contracts 361 19 Eoin O’Dell: The Resulting Trust 20 Stephen A Smith: Rights, Remedies, and Causes of Action

379 405

21 Michael Tilbury: Remedy as Right

421

The Publications of Peter Birks 1969–2005

441

Index

453

List of Contributors Kit Barker is Associate Professor of Law, TC Beirne School of Law, The University of Queensland Michael Bryan is Professor of Law, The University of Melbourne Peter Butler is sometime Senior Lecturer in Law, TC Beirne School of Law, The University of Queensland Hanoch Dagan is Dean and Professor of Law, Tel Aviv University Simone Degeling is Associate Professor of Law, University of New South Wales Daniel Friedmann is Minister of Justice of Israel and formerly Professor of Law, Tel Aviv University and the College of Management Mark Gergen is Fondren Chair in Faculty Excellence, University of Texas Law School Ross Grantham is Professor of Commercial Law, TC Beirne School of Law, The University of Queensland Steve Hedley is Professor of Law, University College Cork John McCamus is Professor of Law and University Professor, Osgoode Hall Law School, York University Mitchell McInnes is Professor of Law, University of Alberta Eoin O’Dell is Fellow and Senior Lecturer in Law, Trinity College Dublin Charles Rickett is Sir Gerard Brennan Professor of Law and Head of the TC Beirne School of Law, The University of Queensland Struan Scott is Associate Professor of Law, University of Otago Emily Sherwin is Professor of Law, Cornell University Stephen Smith is Professor of Law and William Dawson Scholar, McGill University Richard Sutton is Professor of Law Emeritus, University of Otago Michael Tilbury is Law Commissioner, New South Wales Law Reform Commission and formerly Edward Jenks Professor of Law, The University of Melbourne Stephen Waddams is Coodman-Schipper Professor of Law, University of Toronto Peter Watts is Professor of Law, The University of Auckland

x Ernest Weinrib is University Professor and Cecil A Wright Professor of Law, Univesity of Toronto

Table of Cases TABLE OF CAS ES

Australia Alati v Kruger (1955) 94 CLR 216 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . 372, 376 Allen v Snyder [1977] 2 NSWLR 685 (NSWCA) . . . . . . . . . . . . . . . . . . . . . . . 394 Australian Broadcasting Commission v Lenah Game Meats (2001) 208 CLR 199 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426 Australian Guarantee Corp Ltd v Balding (1930) 43 CLR 140 (HCA) . . . . . . . 229 Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 (HCA). . . . 227–28, 230, 241–43 Bahr v Nicolay (No 2) (1988) 164 CLR 604 (HCA) . . . . . . . . . . . . . . . . . . 357–58 Baltic Shipping Co v Dillon (1993) 176 CLR 344 (HCA) . . . . . 226, 231,239, 243 Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 (HCA). 347 Baumgartner v Baumgartner (1987) 164 CLR 137 (HCA) . . . . . . . . . . . . . . . . 357 Black v S Freedman & Co (1910) 12 CLR 105 (HCA) . . . . . . . . . . . . 345–46, 396 Brown v Brown (1993) 31 NSWLR 582 (NSWCA) . . . . . . . . . . . . . . . . . 380, 385 Bryan v Maloney (1995) 182 CLR 609 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Buffrey v Buffrey [2006] NSWSC 1349 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Calverly v Green (1984) 155 CLR 242 (HCA) . . . . . . . . . . . . . . . . . 380, 388, 394 Chalet Homes Pty Ltd v Kelly [1978] Qd R 389 (QSC) . . . . . . . . . . . . . . . . . . 231 Commissioner of State Revenue (Victoria) v Royal Insurance Australia Ltd (1994) 182 CLR 51 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 Commissioner of Taxation v Linter Textiles Australia Ltd (2005) 220 CLR 59 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Commonwealth of Australia Verwayen (1990) 170 CLR 394 (HCA) . . . . . . . . 433 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 . . . 353 Corin v Patton (1990) 169 CLR 540 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 (NSWCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 Damberg v Damberg [2001] NSWCA 87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101, 243, 268, 275, 292 Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234 (HCA) . . . . . . . . 425 Dowsett v Reid (1912) 15 CLR 695 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 DPC Estates Pty Ltd v Grey and Consul Developments Pty Ltd [1974] 1 NSWLR 443 (NSWCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355 Dullow v Dullow (1985) 3 NSWLR 531 (NSWCA) . . . . . . . . . . . . . . . . . 380, 382 Elkhoury v Farrow Mortgage Services Pty Ltd (in liq) (1993) 114 ALR 541 (FCA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 . . . . 11–12, 340–41, 347, 350–59 Fehlburg v Stanton (1960) ALR 299 (HCA) . . . . . . . . . . . . . . . . . . . . 232, 241–42

xii

Table of Cases

Graham v Baker (1961) 106 CLR 340 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . 228 Grant (John) & Sons Ltd v Trocadero Building & Investment Co Ltd (1937–38) 60 CLR 1 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231, 242 Gray v Motor Accidents Commission (1998) 196 CLR 1 (HCA) . . . . . . . 434, 436 Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 (NSWCA) . . . . . . . . . . . 88 HCK China Investments Ltd v Solar Honest Ltd [1999] FCA 1156 . . . . . . . . . 384 Hill v Van Erp (1997) 188 CLR 159 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Hughes v Australian Blue Metal Ltd [1964–5] NSWR 938 (NSWSC) . . . . . . . . 424 Ilich v R (1987) 162 CLR 110 (HCA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 Johnson Tiles Pty Ltd v Esso Australia Ltd [2003] VSC 27 (VSC). . . . . . . . . . . . 61 Killen v Rennie [2005] NSWCA 392. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381, 384 Koorootang Nominees Pty Ltd v Australian and New Zealand Banking Group Ltd [1998] 3 VR 16 (VSC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Lamb v Cotogno (1987) 164 CLR 1 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 436 LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 (WASC) . . . . . . . . . 340 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 (HCA) . . . 233, 235, 237–38, 240–43 Macquarie Bank v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 (VSC) . . . . . 340 Marshall (Charles) Pty Ltd v Grimsley (1956) 95 CLR 353 (HCA) . . . 383–84, 387 Muschinski v Dodds (1985) 160 CLR 583 (HCA) . . . . . . . . . . . . . . . . . . 344, 384 Nelson v Nelson (1995) 184 CLR 538 (HCA). . . . . . . . . . . . . . . . . . . 380–81, 385 Nolan v Collie [2003] VSCA 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124 (QSC) . . . . . . . . . . . . . 231 Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221 (HCA). . . . . 37, 39, 67, 81, 251, 276 Perre v Apand [1999] HCA 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 (HCA) . . . . . . . . . . . . . . . 232 Plaimar Ltd v Waters Trading Co Ltd (1945) 72 CLR 304 . . . . . . . . . . . . . . . . 229 Port of Brisbane Corp v ANZ Securities (No 2) [2003] Qd R 661 (QCA) . . . . . 358 Rawson v Hobbs (1961) 107 CLR 466 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . 243 Renard Constructions Pty Ltd v Minister of Public Works (1992) 20 NSWLR 234 (NSWCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Reynolds v Fury (1921) VLR 14 (VSC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286 (NSWCA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340, 347–49 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, (2001) 185 ALR 335 (HCA) . . . . . . . . 9, 11–12, 101, 138, 172–74, 178, 243–44, 246–47, 275, 289 Russell v Scott (1936) 55 CLR 440 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 (NSWSC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251, 260 Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2007] NSWCA 22 . . . . . . . . . 358 Smith v Noske [1913] VLR 329 (VSC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 Smith Kline Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73 (FCA) . . . . . . . . . . . . . . . . . . . . . . . 439

Table of Cases

xiii

Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285 (FCA/NSWSC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268, 274, 358 State Bank of NSW v Swiss Bank (1995) 39 NSWLR 3350 (NSWSC) . . . . . . . 358 Steele v Tardiani (1946) 72 CLR 386 (HCA). . . . . . . . . . . . . . . . . . . . . . . . 232–33 Sutherland (Council of the Shire of) v Heyman (1985) 157 CLR 424 (HCA) . . 25, 65 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 (HCA) . . . . . . . . . . . . . . . . . 234 Tara Shire Council v Garner [2003] 1 Qd R 556 (QCA) . . . . . . . . . . . . . . . 357–58 Thompson v Leigh [2006] NSWSC 540 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 Trend Management Ltd v Borg (1996) 40 NSWLR 500 (NSWCA). . . . . . . . . . 436 Veen v The Queen (No 2) (1988) 164 CLR 465 (HCA) . . . . . . . . . . . . . . . . . . 433 Victoria Park Racing v Taylor (1937) 58 CLR 479 (HCA) . . . . . . . . . . . . . . . . 201 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (HCA). . . 243, 437–38 Wasada Pty Ltd v State Rail Authority of New South Wales (No 2) [2003] NSWCA 987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268, 274 Westpac Banking Corp v Hilliard [2006] VSC 470 (VSC). . . . . . . . . . . . . . . . . 358 Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1935–36) 54 CLR 361 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 White v Tomasel [2004] 2 Qd R 438 (QCA). . . . . . . . . . . . . . . . . . . . . . . . . . . 357 Whitfield v De Lauret & Co Ltd (1920) 29 CLR 71 (HCA) . . . . . . . . . . . . . . . 434 Williams v Milotin (1957) 97 CLR 465 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . 425 Winterton Construction Pty Ltd v Hambros Australia and Another (1991) 101 ALR 363 (FCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 Wirth v Wirth (1956) 98 CLR 228 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR 515 (HCA) . . . 330 XL Petroleum (NSW) Pty Ltd v Caltex Oil (Aust) Pty Ltd (1985) 155 CLR 448 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 Yerkey v Jones (1939) 63 CLR 649 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357 York Air Conditioning and Refrigeration (Australasia) Pty Ltd v Commonwealth (1949) 80 CLR 11 (HCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242–43

Canada Air Canada v British Columbia [1989] 1 SCR 1161 (SCC) . . . . 16, 92, 101, 291–97, 300–3, 305–11, 313, 315–16 Air Canada v Ontario (Liquor Control Board) [1997] 2 SCR 581 (SCC) . . . . 88, 92, 98–99, 292, 305, 313 Amax Potash Ltd v Government of Saskatchewan [1977] 2 SCR 576 (SCC). . . 308 Andrews v Grand & Toy Alberta Ltd [1978] 2 SCR 229 (SCC) . . . . . . . . . . . . . 98 Attorney General of British Columbia v Deeks Sand & Gravel Co Ltd [1956] SCR 336 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Authorson v Canada (Attorney General) [2003] 2 SCR 40 (SCC) . . . . . . . . . . . 293 Bank of America Canada v Mutual Trust Co [2002] 2 SCR 601 (SCC). . . . . . . . 88 Breckenridge Speedway Ltd v Alberta [1970] SCR 175 (SCC) . . . . . . . . . . . . . 317 Brisette Estate v Westbury Life Insurance Co [1992] 3 SCR 87 (SCC) . . . . . . . . 95 Cadbury Schweppes Inc v FBI Foods Ltd [1999] 1 SCR 142 (SCC) . . . . . . 98, 101

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Campbell v Campbell (1999) 173 DLR (4 ) 270 (Ont CA) . . . . . . . . . . . . . . . . 264 Canadian National Railway v Norsk Pacific Steamship Co [1992] 1 SCR 1021 (SCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Canadian Pacific Airlines Ltd v British Columbia [1989] 1 SCR 1133 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291, 310 Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 531 (SCC) . . . . . . . . . 98 Citadel General Assurance Co v Lloyds Bank Canada [1997] 3 SCR 805 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88, 92, 98, 100 Communities Economic Development Fund v Canadian Pickles Corp [1991] 3 SCR 388 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Cooper v Hobart [2001] 3 SCR 537 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Cunningham v Wheeler [1994] 1 SCR 359 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . 91 Deglman v Guaranty Trust and Constantineau [1954] SCR 725 (SCC) . . . 31, 39, 81, 99 Dobson v Dobson (1999) 174 DLR (4 ) 1 (SCC) . . . . . . . . . . . . . . . . . . . . . . 84, 87 Eadie v Township of Brantford [1956] SCR 573 (SCC). . . . . . . . . . . . . . . . . . . 292 Estok v Heguy (1963) 40 DLR (2d) 88 (BCSC). . . . . . . . . . . . . . . . . . . . . 249, 252 Eurig Estate, Re [1998] 2 SCR 565 (SCC). . . . . . . . . . . . . . 92, 101, 306, 308, 313 Garland v Consumers’ Gas Co [2004] 1 SCR 629, [2004] SCC 25 (SCC) . . . . 13, 66, 67, 68, 91–92, 98, 317–18 Goodfriend v Goodfriend (1972) 22 DLR (3d) 699 (SCC) . . . . . . . . . . . . . . . . 281 Guerin v The Queen [1984] 2 SCR 335 (SCC) . . . . . . . . . . . . . . . . . . . . . . 98, 293 Hodgkinson v Simms [1994] 3 SCR 377 (SCC). . . . . . . . . . . . . . . . . . . . . . . 91, 98 Horsley v MacLaren (The Ogopogo) (1971) 22 DLR (3d) 545 (SCC) . . . . . . . . 288 Huff v Price (1990) 51 BCLR (2d) 282 (BCCA) . . . . . . . . . . . . . . . . . . . . . . . . . 88 Hunter Engineering Co v Syncrude Canada Ltd [1989] 1 SCR 426 (SCC) . . . . . 95 Hydro Electric Commission of the Township of Nepean v Ontario Hydro [1982] 1 SCR 347 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291–94, 303 Kingstreet Investments Ltd v New Brunswick (Department of Finance) (2004) 236 DLR (4 ) 733 (NBQB); (2005) 254 DLR (4 ) 715 (NBCA); [2007] 1 SCR 3, [2007] SCC 1, (2007) 276 DLR (4) 342 (SCC) . . . . . 92, 101, 294, 298, 306–18 KLB v British Columbia [2003] 2 SCR 403 (SCC) . . . . . . . . . . . . . . . . . . . . . . . 91 Kolari, Re [1982] 36 OR (2d) 473 (Dist Ct) . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 Lac Minerals Ltd v International Corona Resources Ltd (1989) 25 DLR (4 ) 504 (Ont HCJ); [1989] 2 SCR 574 (SCC) . . . . . 39, 91, 95–96, 98, 101, 255–56 M(K) v M(H) [1992] 3 SCR 6 (SCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 McInerney v MacDonald (1992) 93 DLR (4 ) 415 (SCC). . . . . . . . . . . . . . . . . . . 91 Madsen Estate v Saylor [2007] SCC 18 (SCC). . . . . . . . . . . . . . . . . . 380, 385, 388 Matheson v Smiley [1932] 2 DLR 787 (Man CA) . . . . . . . . . . . . . . . . . . . . . . . 285 Montreuil v Ontario Asphalt Co (1922) 63 SCR 401 (SCC) . . . . . . . . . . . . . . . 255 More (James) & Sons Ltd v University of Ottawa (1974) 49 DLR (3d) 666 (Ont HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Murdoch v Murdoch (1973) 41 DLR (3d) 367 (SCC) . . . . . . . . . . . . . . . . . . . . 100 New Solutions Financial Corp v Transport North American Express Inc [2004] 1 SCR 249 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Niles v Lake [1947] 2 DLR 248 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387 th

th

th

th

th

th

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Norberg v Wynrib [1992] 2 SCR 226 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Nowell v Town Estate (1997) 35 OR (3d) 415 (Ont CA) . . . . . . . . . . . . . . . . . 100 Ogopogo, The. See Horsley v MacLaren Pacific National Investments Ltd v Victoria (City) [2004] SCC 75, [2004] 3 SCR 575 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66, 68, 92, 293 Pecore v Pecore [2007] SCC 17 (SCC) . . . . . . . . . . . . . . . . . 380, 382, 384–85, 388 Peel (Regional Municipality of) v Her Majesty the Queen in the Right of Canada [1992] 2 SCR 762, (1992) 98 DLR (4) 140 (SCC) . . . . . . . . . . . . . . . 40, 67, 98 Peter v Beblow [1993] 1 SCR 980 (SCC) . . . . . . . . . . . . . . . . . . . . . . . 54, 98, 100 Pettkus v Becker [1980] 2 SCR 834 (SCC). . . . . . . . 22, 36, 39, 66, 94–95, 98, 100 Pre-Cam Exploration & Development Ltd v McTavish [1966] SCR 551 (SCC) . 95 Rathwell v Rathwell [1978] 2 SCR 436 (SCC) . . . . . . . . . . . . . . . . . . . . . . 66, 100 Ratych v Bloomer [1990] 1 SCR 940 (SCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 RBC Dominion Securities v Dawson (1994) 111 DLR (4 ) 230 (Nfld CA) . . . . . 41 RDS v The Queen [1994] NSJ No 629 (Fam Ct); [1997] 3 SCR 484 (SCC) . 89–90 RWDSU, Local 580 v Dolphin Delivery Ltd [1986] 2 SCR 573 (SCC) . . . . . . . . 84 Sorochan v Sorochan (1986) 29 DLR (4 ) 1 (SCC). . . . . . . . . . . . . . . . . . . . . . . . 67 Soulos v Korkontzilas [1997] 2 SCR 217 (SCC) . . . . . . . . . . . . . . . . . . 96–97, 101 Storthoaks (Rural Municipality) v Mobil Oil Canada Ltd [1976] 2 SCR 147 (SCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 th

th

th

Ireland AIB Finance v Sligo Co [1995] 1 ILRM 81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 BL v ML [1992] 2 IR 77 (SC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Containercare (Ireland) Ltd v Wycherley [1982] IR 143 (HC) . . . . . . . . . . . . . 386 Dublin Corporation v Building & Allied Trades Union, unreported, 6 March 1996 (HC); reversed [1996] 1 IR 468 . . . . . . . . . . . . . . . . . . . . . . 393 EN v RN [1992] 2 IR 116 (SC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Fitzpatrick v Criminal Assets Bureau [2000] 1 IR 243 (SC). . . . . . . . . 387–88, 393 Grimes, Re [1937] IR 470 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Irwin v O’Connell [1936] IR 44 (SC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 Lane’s Trusts, Re (1863) 14 Ir Ch Rep 523 (RC). . . . . . . . . . . . . . . . . . . . . . . . 389 Lynch v Burke [1991] IR 1 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 Lynch v Burke [1995] 2 IR 159 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383, 388 McCabe v Ulster Bank Ltd [1939] IR 1 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . 385 McEneaney v Shevlin [1912] 1 IR 32 (HC); [1912] 1 IR 278 (CA) . . . . . . . . . . 383 McGillicuddy v Joy [1959] IR 189 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 Owens v Greene [1932] IR 225 (SC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 RF v MF [1995] 2 ILRM 572 (SC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385–86 Slattery, Re [1917] 2 IR 278 (HC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382, 387 W v W [1981] ILRM 202 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Wall’s Estate, Re [1922] 1 IR 59 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385

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Israel A.Sh.I.R. Import, Production & Distribution v Forum Avisarim and Consumption Products Ltd (1998) 52(4) PD 289. . . . . . . . . . . . . . . . . . . . . 202 Aloniel Ltd v McDonald (2004) 58(4) PD 314 (CA 8432/04) . . . . . . . . . . . . . . 201 The Boeing Co v Boeing Travel and Tourist [1989] (3) PM 108 . . . . . . . . . . . . 199

New Zealand Bateman Television v Bateman [1971] NZLR 453 (NZCA) . . . . . . . . . . . . . . . 387 Butler v Countrywide Finance Ltd [1993] 3 NZLR 623 (NZCA) . . . . . . . . . . . . 98 Cripps v Lakeview Farm Fresh Ltd [2006] 1 NZLR 238 (NZHC) . . . . . . . . . . 375 Fortex Group Ltd v Macintosh [1998] 3 NZLR 171 (NZCA) . . . . . . . . . 365, 426 Hosking v Runting [2003] 3 NZLR 285 (NZCA) . . . . . . . . . . . . . . . . . . . . . . . 438 Invercargill City Council v Hamlin [1994] NZLR 513 (NZCA) . . . . . . . . . . . . 373 Mollgaard v ARCIC [1999] 3 NZLR 735 (HCNZ) . . . . . . . . . . . . . . . . . . . . . 273 Morning Star (St Lukes Garden Apartments) Ltd v Canam Construction Ltd (CA90/05), 8 August 2006 (NZCA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 National Bank of New Zealand Ltd v Waitaki Intl Processing (NI) Ltd [1999] 2 NZLR 211 (NZCA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 R v Parker [1919] NZLR 365 (NZCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (NZCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Ruddenklau v Charlesworth (1925) NZLR 161 (NZCA) . . . . . . . . . . . . . . . . . 230 South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 (NZCA) . . . . . . . . . . . . . . . . . . . . . 373 Tauranga Borough v Tauranga Electric Power Board [1944] NZLR 155 (NZCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 Van den Berg v Giles [1979] 2 NZLR 111 (HCNZ) . . . . . . . . . . . . . . . . . . . . . 252

United Kingdom Air Jamaica v Charlton [1999] 1 WLR 1399 (PC) . . . . . . . . . . . 79, 86, 380, 402–3 Ali v Khan [2002] EWCA Civ 974 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . 385, 387 Anns v Merton London Borough Council [1978] AC 728 (HL) . . . . . . . . . . . . . 65 Anonymous (1471) YB 11 Edw IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 Arosa v Coutts [2002] 1 All ER (Comm) 241 (HC) . . . . . . . . . . . . . . . . . 382, 388 Arris v Stukely (1677) 2 Mod 260 (Exchequer Ct) . . . . . . . . . . . . . . . . . . . 190–91 Ash v McKennitt [2006] EWCA 1714. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 Asher v Wallis (1707) 11 Mod 146 (QB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Associated Newspapers Ltd v HRH the Prince of Wales [2006] EWCA Civ 1776. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438–39 Attorney General v Blake [2001] 1 AC 268 (HL) . . . . . . 79, 88, 182, 289, 425–26

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Attorney General v Guardian Newspapers (No 2) [1990] 1 AC 109 (HL). . . . . . . 93, 194, 438 Attorney General for Canada v Ritchie Contracting & Supply Co Ltd [1919] AC 999 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Attorney-General of Hong Kong v Humphrey’s Estate (Queen’s Gardens) Ltd [1987] AC 114 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250, 252 Attorney General for Hong Kong v Reid [1994] 1 AC 324 (PC) . . . . . . . . . 94, 354 Auckland Harbour Board v The King [1924] AC 318 (PC). . . . . . . . . . . . . . . . 307 Aveling Barford Ltd v Perion Ltd [1989] BCLC 626 (HC) . . . . . . . . . . . . . . . . 378 Ayerst v C & K (Construction) Ltd [1976] AC 167 (HL) . . . . . . . . . . . . . 373, 376 B P Exploration Co (Libya) v Hunt (No 2) [1979] 1 WLR 783 (HC) . . . . . . . . . 40 Baker v Hopkins (T E) & Son Ltd [1958] 1 WLR 993 (HC). . . . . . . . . . . . . . . 288 Baker v Inwards [1965] 2 QB 29 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2000] 4 All ER 221 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Banner Homes Group plc v Luff Developments Ltd (No 2) [2000] Ch 372 (CA) 94 Bannister v Bannister [1948] 2 All ER 133 (CA). . . . . . . . . . . . . . . . . . . . . . . . . 94 Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 (HL) . . . . 2, 79, 268, 363 Barclays Bank v Quistclose Investments [1970] AC 567 (HL). . . . . . . . . . 386, 393 Barclays Bank Ltd v W J Simms, Son & Cooke (Southern) Ltd [1980] QB 677 (HC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190–91, 275 Barclays Bank plc v Boulter [1999] 1 WLR 1919 (HL) . . . . . . . . . . . . . . . 370, 375 Barnes v Addy (1874) LR 9 Ch App 244 . . . . . . . 340–41, 344–45, 347–49, 352–56, 358–59 Barney, Re [1892] 2 Ch 265 (HC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Baylis v Bishop of London [1913] 1 Ch 127 (CA) . . . . . . . . . . . . . . . . . . . . . . 246 Belmont Finance Corporation v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 Bennet v Bennet (1879) LR 10 Ch D 474 (HC). . . . . . . . . . . . . . . . . . . . . 380, 385 Berkeley Applegate (Investment Consultants) Ltd, Re [1989] Ch 32 . . . . . . . . . 276 Blue Haven Enterprises Ltd v Tully [2006] UKPC 17 (PC) . . . . . . . . . . . . 250, 256 Boardman v Phipps [1967] 2 AC 46 (HL). . . . . . . . . . . . . . . . . . . . . . . . . . 94, 189 Boscawen v Bajwa [1996] 1 WLR 328 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Brewer Street Investments Ltd v Barclays Woollen Co Ltd [1954] 1 QB 428 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 Bristol & West Building Society v Mothew [1998] Ch 1 (CA). . . . . . . . . . . . . . 370 Brooks v Beirnstein [1909] 1 KB 98 (HC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 Brooks Wharf & Bull Wharf v Goodman Bros [1937] 1 KB 534 (CA) . . . . . 32, 40 Brougham v Dwyer (1913) 29 TLR 234 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . 377 Campbell v MGN Ltd [2004] 2 AC 457, [2004] 2 WLR 1232 (HL) . . . . . 194, 439 Caparo Industries v Dickman [1990] 2 AC 605 (HL) . . . . . . . . . . . . . . . . . 65, 187 Capital and Counties plc v Hampshire CC [1997] QB 1004 (CA). . . . . . . . . . . 288 Car & Universal Finance Ltd v Caldwell [1965] 1 QB 525 (CA). . . . . . . . . 370–71 Carlton v Goodman [2002] EWCA Civ 545 . . . . . . . . . . 382–83, 388, 393, 402–3

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Chandler v Webster [1904] 1 KB 493 (CA) . . . . . . . . . . . . . . . . . . . . . 174–75, 241 Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94, 362–64, 367–68 Chaterton v Maclean [1951] 1 All ER 761 (HC) . . . . . . . . . . . . . . . . . . . . . . . . 237 Choithram (T) International SA v Pagarani [2001] 1 WLR 1 (PC). . . . . . . . . . . 388 Cleveland Trust plc, Re [1991] BCLC 424 (HC) . . . . . . . . . . . . . . . . . . . . . . . . 378 Clough v London & Northwestern Railway (1871) LR 7 Ex 26 . . . . . . . . . 370–71 Cook v Deeks [1916] 1 AC 554 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354 Cook v Hutchinson (1836) 1 Keen 42 (RC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Cowcher v Cowcher [1972] 1 WLR 425 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . 383 Crabb v Arun District Council [1976] 1 Ch 179 (CA). . . . . . . . . . . . . . . . . . . . 438 Craven Ellis v Canons Ltd [1936] 2 KB 403 (CA). . . . . . . . . . . . . . . . . . . . . . . 251 Criterion Properties plc v Stratford UK Properties LLC [2004] 1 WLR 1846 (HL). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Croome v Croome (1888) 59 LT 582 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 (CA) . . . . 275, 287 Cundy v Lindsay (1878) 3 App Cas 459 (HL). . . . . . . . . . . . . . . . . . . . . . 370, 372 Cutter v Powell (1795) 6 TR 320 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 De Mattos v Gibson (1858) 4 De G & J 276 (CA) . . . . . . . . . . . . . . . . . . . . . . 187 De Visme, Re (1864) 2 De G J & S 17 (CA in Chancery) . . . . . . . . . . . . . . . . . 380 Derry v Peek (1889) 14 App Cas 337 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Deutsche Morgan Grenfell Group plc v IRC [2006] Ch 243 (CA); [2006] UKHL 49, [2006] 3 WLR 781 (HL) . . 49, 71–73, 79, 101, 138, 271–72, 274, 277, 314 Dies v British & International Mining Finance Corp Ltd [1939] 1 KB 724 (HC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175–76, 240 Dillwyn v Llewelyn (1862) 4 De G F & J 517 (CA in Chancery) . . . . . . . . . . . 249 Donoghue v Stevenson [1932] AC 562 (HL). . . . . . . . . . . . . . . . . . . . . . . 246, 271 Douglas v Hello! [2005] EWCA Civ 595 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 (HL) . . . . . . . . . . . . 88, 281 Dufour v Pereira (1769) 1 Dick 419 (HC of Chancery). . . . . . . . . . . . . . . . . . . . 94 Dyer v Dyer (1788) 2 Cox Eq 92 (Ex) . . . . . . . . . . . . . . . . . . . . . . . . . . . 382, 389 Earl Dawdor v Lewis (1835) 1 Y & C Ex 427 (Ct of Exchequer in Equity) . . . 255 Eastgate, ex parte Ward, Re [1905] 1 KB 465 . . . . . . . . . . . . . . . . . . . . . . 370, 375 Edinburgh and District Tramways Ltd v Courtenay [1908] 16 SLT 548, 1909 SC 99 (Ct of Sess, 1 Div). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 64 El Aljou v Dollar Land Holdings plc [1993] 3 All ER 717 (HC); reversed [1994] 2 All ER 685 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370, 402 Exall v Partridge (1799) 8 Term Rep 308 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . 286 Eykyn’s Trust, Re (1877) 6 Ch D 115 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 F, In re [1990] 2 AC 1 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 (CA) . . . . 35, 250, 254, 272 Ferguson v Carrington (1829) 9 B & C 59 (KB) . . . . . . . . . . . . . . . . . . . . . . . . 369 Ferguson (D O) & Associates v Sohl (1992) 62 Build LR 95 (CA) . . . . . . . . . . 243 st

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Fibrosa Spolka Akcynja v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136, 174, 226–27, 234, 238, 240–42 Foord, Re [1922] 2 Ch 519 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Foskett v McKeown [2001] 1 AC 102 (HL). . . 11, 31, 79, 101, 138, 346, 365, 404 Fowkes v Pascoe (1875) LR 10 Ch 343 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . 388 Frazer v Walker [1967] 1 AC 569 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356 Garrett v Wilkinson (1848) 2 De G & Sm 344 (HC in Chancery). . . . . . . . . . . 385 Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Gissing v Gissing [1971] AC 886 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383 Gladstone v Hadwen (1813) 1 M & S 517 (KB) . . . . . . . . . . . . . . . . . . . . . 369–71 Goldcorp Exchange Ltd, Re [1995] 1 AC 74 (PC) . . . . . . . . . . . . . . . . . . . . . . 375 Goring, The [1988] AC 831 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Great Northern Railway Co v Swaffield (1874) LR 9 Ex 132 (Exchequer) . . . . 272 Greenwood v Bennett [1973] 1 QB 195 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Gresley v Mousley (1859) 4 De G & J 78 (CA Ch) . . . . . . . . . . . . . . . . . . . . . . 376 Grey v Grey (1677) 2 Swans 59, (1677) Rep Temp Finch 338 (HC in Chancery) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382, 385 Guinness plc v Saunders [1990] 2 AC 663 (HL) . . . . . . . . . . . . . . . . . . . . . . . . 365 Guinness Mahon & Co Ltd v Kensington and Chelsea Royal London Borough Council [1999] QB 215 (CA). . . . . . . . . . . . . . . . . . . . . . . . . 268, 277 Harrison v Walker (1792) Peake’s NP 150 (KB) . . . . . . . . . . . . . . . . . 369–71, 375 Harrods Ltd v Harrodian School Ltd [1996] RPC 697 (CA) . . . . . . . . . . . . 198–99 Hasham v Zenab [1960] AC 316 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409 Haswell v Hunt Noted 5 TR 232 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369–70 Haynes v Harwood [1935] 1 KB 146 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 (HL) . . . . . . . . . . . . 61, 187 Hodgson v Marks [1971] 1 Ch 892 (CA). . . . . . . . . . . . . . . . . 387, 396–97, 400–1 Hoenig v Isaacs [1952] 2 All ER 176 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 Holland Hodgson (1872) LR 7 CP 328 (Exchequer) . . . . . . . . . . . . . . . . . . . . . 254 Holt v Markham [1923] 1 KB 504 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Hooper v Exeter Corporation (1887) 56 LJQB 457 (HC) . . . . . . . . . . . . . . . . . 302 Howard v Pickford Tool Co Ltd [1951] 1 KB 417 (CA) . . . . . . . . . . . . . . . . . . 364 Howe v Smith (1884) 27 Ch D 89 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 Hussey v Palmer [1972] 1 WLR 1286 (CA). . . . . . . . . . . . . . . . . . . . . . . . 249, 260 Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129 (HL) . . 226, 236–39, 243 International Sales & Agencies Ltd v Marcus [1982] 3 All ER 551 (HC) . . . . . 377 Inwards v Baker [1965] 2 QB 29 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 Jenkins v Tucker (1788) 1 Hy Bl 90 (CP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 John v Dodwell & Co [1918] AC 563 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 Jones (Trustee of) v Jones [1997] Ch 159 (CA) . . . . . . . . . . . . . . . . . . . . . . 11, 189 Junior Books Co v Veitchi Co Ltd [1983] AC 520 (HL) . . . . . . . . . . . . . . . . . . 187

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Keech v Sandford (1726) Sel Cas Ch 61 (LC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Kelly v Solari (1841) 9 M & W 54 (Ex). . . . . . . . . . . . . . . . 248, 258, 262–64, 399 Kingdom v Bridges (1688) 2 Vern 67 (Ct of Chancery) . . . . . . . . . . . . . . . . . . . 385 Kingsford v Merry (1856) 11 Ex 577 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370–71 Kingston v Preston (1773) 2 Dougl 689 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Kleinwort Benson v Birmingham City Council [1996] 4 All ER 773 (CA) . . . . . 33 Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (HL) . . . . 13, 48, 71, 101, 270, 275, 292 Kleinwort Benson Ltd v Sandwell Borough Council [1994] 1 WLR 938 (HC) . 268 Kuppusami v Kuppusami [2002] EWHC 2758 (Ch) . . . . . . . . . . . . . . . . . . . . . 385 Lacey (William) (Hounslow) Ltd v Davis [1957] 1 WLR 932 (HC) . . . . . 251, 261 Laird v Pim (1841) 7 M & W 474; 151 ER 854 (Ct of Exchequer). . . . . . 230, 239 Lane v Dighton (1762) Amb 409 (RC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Lep Air Services Ltd v Rolloswin Investments Ltd [1973] AC 331 (HL) . . . . . . 237 Letang v Cooper [1965] 1 QB 232 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . 410, 425 Lewis v Avery [1972] 1 QB 198 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL) . . . 23, 40, 41, 53, 62, 81, 138, 142, 189–90, 198, 276, 434 Lloyd v Spillet (1740) 2 Atk 148 (HC in Chancery) . . . . . . . . . . . . . . . . . . . . . 382 Lloyd’s Bank v Rosset [1991] 1 AC 107 (HL). . . . . . . . . . . . . . . . . . . . . . . . . . 386 Load v Green (1846) 15 M & W 216 (Ex) . . . . . . . . . . . . . . . . . . . . . 369–71, 375 Lohia v Lohia [2001] WTLR 101 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387 Lonrho plc v Fayed (No 2) [1992] 1 WLR 1 (CA). . . . . . . . . . . . . . . . . . . . . . . . 93 Lord Strathcona Steamship Co Ltd v Dominion Coal Co [1926] AC 108 (PC) . 187 Low v Bouverie [1891] 3 Ch 82 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Lumley v Gye (1853) E & B 216 (QB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187–88 Lysaght v Edwards (1876) 2 Ch D 499 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 McDonald v Coys of Kensington [2004] 1 WLR 2775 (CA) . . . . . . . . . . . . . . . . 39 McPhail v Persons, Names Unknown [1973] 3 WLR 71 (CA). . . . . . . . . . 413, 417 Mara v Browne [1896] 1 Ch 199 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 Martin v Andrews (1856) 7 El & Bl 1 (QB) . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 Martin v Pewtress (1769) 4 Burr 2477 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 Maskell v Horner [1915] 3 KB 106 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Milward v Forbes (1802) 4 Esp 171 (KB) . . . . . . . . . . . . . . . . . . . . . . 369–70, 375 Ministry of Defence v Ashman [1993] 2 EGLR 102 (CA) . . . . . . . . . . . . . . . . . . 87 Morice v Bishop of Durham (1804) 9 Ves Jun 399 (HC in Chancery); affirmed (1805) 10 Ves Jun 522 (HC in Chancery). . . . . . . . . . . . . . . . . . . . . . . . . . . 389 Morton v Lamb (1797) 7 TR 125 (KB). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Moses v Macferlan (1760) 2 Burr 1005. . . . . . . . . . . . . . . . . . . . . . . 135, 168, 172 National Westminster Bank plc v Somer International (UK) Ltd [2002] 1 All ER 198 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320, 324 Neste Oy v Lloyds Bank plc (The Tiiskeri) [1983] 2 Lloyd’s Rep 658 (HC). . . . . 364, 366–67 Newfoundland Government v Newfoundland Railway Co (1888) 13 App Cas 190 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

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Nicholson v Chapman (1793) 2 Hy Bl 254 (CP) . . . . . . . . . . . . . . . . . . . . . . . . 272 Nicholson v Mulligan (1869) IR 3 Eq 308 (RC) . . . . . . . . . . . . . . . . . . . . . . . . 383 Niru Battery Manufacturing Co v Milestone Trading Ltd (No 2) [2004] 2 All ER Comm 289 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 Nurdin & Peacock plc v D B Ramsden & Co Ltd [1999] 1 All ER 941 (Ch) . . 366 O’Sullivan v Management Agency & Music Ltd [1985] QB 428 (CA) . . . . . . . 372 Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 1308 (CA) . . . 96 Orakpo v Manson Investments Ltd [1978] AC 95 . . . . . . . . . . . . . . . . . . . . . . 136 Ottaway v Norman [1972] Ch 698 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Oxley v Hiscock [2004] EWCA Civ 546. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 Pallant v Morgan [1953] 1 Ch 43 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Palmer v Temple (1839) 9 Ad & E 520; 112 ER 1309. . . . . . . . . . . . . . . . . 238–39 Pan Ocean Shipping Ltd v Creditcorp Ltd [1994] 1 WLR 161 (HL) . . . . . 178, 243 Pao On v Lau Yiu Long [1980] AC 614 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Paragon Finance v Thakerar [1999] 1 All ER 400 (CA). . . . . . . . . . . . . . . . . . . 396 Parker v McKenna (1874) LR 10 Ch App 96 (CA) . . . . . . . . . . . . . . . . . . . . . . 355 Parker v Patrick (1793) 5 TR 175 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 Patel v Ali [1984] Ch 283 (HC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435 Pettit v Pettit [1970] AC 777 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . 383–84, 388 Phillips v Homfray [1892] 1 Ch 465 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Phipps v Boardman [1967] 2 AC 46 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Photoproduction Ltd v Securicor Transport Ltd [1980] AC 827, [1980] 2 WLR 283 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234, 412 Pickard v Sears (1837) 6 A & E 439 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 Pickering v Ilfracombe Railway Co (1868) LR 3 CP 235 (CP). . . . . . . . . . . . . . 231 Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268, 274 Potter v Potter [2004] UKPC 41 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 Powell v Hoyland (1851) 6 Ex 67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 Powys v Mansfield (1835) 2 Myl & Cr 359 (HC in Chancery) . . . . . . . . . . . . . 385 Prager v Blatspiel, Stamp & Heacock Ltd [1924] 1 KB 566 (KB) . . . . . . . . . . . 272 Precision Dippings Ltd v Precision Dippings Marketing Ltd [1986] Ch 447 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 R v IRC, ex parte Woolwich Equitable Building Society [1990] 1 WLR 1400 (HL). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 R v Tower Hamlets London Borough Council, ex parte Chetnik Developments Ltd [1988] AC 858 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 Ramsden v Dyson (1866) LR 1 HL 129 (HL) . . . . . . . . . . . . . . . 39, 249, 252, 326 Read v Brown [1889] 22 QBD 128 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . 410, 425 Read v Hutchinson (1813) 3 Camp 352 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . 370 Reese River Silver Mining Co v Smith (1869) LR 4 App Cas 64 (HL) . . . . . . . . 376 Regalian Properties plc v London Docklands Development Corp [1995] 1 WLR 212 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251, 260 Rochefoucauld v Boustead [1897] 1 Ch 196 (CA). . . . . . . . . . . . . . . . . . . . 396–97 Rogers v Price (1829) 3 Y & J 28 (Exch Plea). . . . . . . . . . . . . . . . . . . . . . 272, 276

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Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] Ch 246 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Rookes v Barnard [1964] AC 1129; [1964] 1 All ER 367 (HL). . . . . . . . . . . . . 433 Rose, Re [1952] Ch 499 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773. . . . . . . . . . . . . 383–84 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378. . . . . . . . . . . . . . . . . . . 353 Ruabon Steamship Co v London Assurance [1900] AC 6 (HL) . . . . . . . . . . . . . . 32 Ryall v Ryall (1739) 1 Atk 59 (HC in Chancery) . . . . . . . . . 382, 395–96, 399–400 Rylands v Fletcher (1868) LR 3 HL 330 (HL). . . . . . . . . . . . . . . . . . . . . . . . . . 186 S (a child), In re [2005] 1 AC 993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 Sayre v Hughes (1868) LR 5 Eq 376 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Scott v Surman (1743) Willes 400 (CP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 Seagar v Copydex Ltd [1967] 1 WLR 923 (HC); [1969] 1 WLR 809 (CA) . . . . 194 Sekhon v Allisa [1989] 2 FLR 94 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Shalson v Russo [2005] Ch 281 (HC) . . . . . . . . . . . . . . . . . . 367, 370–71, 375–76 Shephard v Cartwright [1955] AC 431 (HL). . . . . . . . . . . . . . . . . . . . . . . 384, 387 Simaan v Pilkington Glass [1988] QB 758 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . 61 Sinclair v Brougham [1914] AC 398 (HL) . . . . . . . . . . . . . . . 81, 292, 362–63, 377 Sinclair v Stevenson (1825) 2 Bing 514 (CP) . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 Slade’s Case (1602) 4 Coke Rep 91. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Slater v Burnley Corporation (1888) 59 LT 636 (QBD). . . . . . . . . . . . . . . 302, 318 Small v Attwood (1831) Younge 407 (HL); revised 6 Cl & F 232 (HL). . . . . . . 371 Smith v Coffin (1795) 2 H Bl 444 (CP and Ex) . . . . . . . . . . . . . . . . . . . . . . . . . 374 Stack v Dowden [2005] EWCA Civ 857 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 Standing v Bowring (1885) 31 Ch D 292 (CA) . . . . . . . . . . . . . . . . . . . . . . 382–83 Steele v Williams (1853) 8 Exch 625. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302 Stevenson v Newnham (1853) 13 CB 285 (Ex) . . . . . . . . . . . . . . . . . . . . . 370, 372 Stockloser v Johnson [1954] 1 QB 476 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 (HL) . 237–38, 240, 243 Strutt v Smith (1834) 1 Cr M & R 312 (Ex) . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 Sumpter v Hedges [1898] 1 QB 673 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . 176, 232 Taylor v Laird (1856) 25 LJ Ex 329 . . . . . . . . . . . . . . . . . . . . . . . . 38, 41–42, 255 Taylor v Motability Finance Ltd [2004] EWHC (Comm) 2619 . . . . . . . . . . . . . 181 Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd (Note) [1982] QB 133 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250, 256 Tharsis Sulphur & Copper Co v M’Elroy & Sons (1878) 3 App Cas 1040 (HL) . 231 Tiiskeri, The. See Neste Oy v Lloyds Bank plc Tilley v Bowman Ltd [1910] 1 KB 745 . . . . . . . . . . . . . . . . . . . . . . . . . . . 370, 375 Timmins v Gibbins (1852) 18 QB 722; 118 ER 273 . . . . . . . . . . . . . . . . . . . . . 229 Tinsley v Milligan [1994] 1 AC 340 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . 381, 383 Tito v Waddell [1977] 106 Ch 332 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Tojo Maru, The [1972] AC 242 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Twinsectra v Yardley [1999] Lloyd’s Rep Bank 438 (CA); [2002] 2 AC 164 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79, 86, 370, 386, 401–2

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Twyford v Manchester Corporation [1946] Ch 236 (HC) . . . . . . . . . . . . . . . . . 302 United Australia Ltd v Barclays Bank Ltd [1941] AC 1 (HL) . . . . . . . . . . . 135–36 Vajpeyi v Yusaf [2003] EWHC 2788. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382 Vandervell v IRC [1966] Ch 261 (CA); [1967] 2 AC 291 (HL) . . . . 383–84, 388–91, 403 Vandervell’s Trusts (No 1) [1971] AC 912 (HL) . . . . . . . . . . . . . . . . . . . . . . . . 390 Vandervell’s Trusts (No 2), Re [1974] 1 Ch 269 (HC) . . . . . . . . . . . . 383, 388, 390 Venture, The [1908] P 218 (CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382, 387 Vinogradoff, Re [1935] WN 68 (HC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Wainwright v Home Office [2004] 2 AC 406 (HL). . . . . . . . . . . . . . . . . . . . . . 439 Westdeutsche Landesbank Girozentrale v Islington LBC [1994] 4 All ER 890 (HC); [1996] AC 669 (HL) . . . 71, 86, 138, 277, 292–93, 362–64, 367, 377, 380, 383–84, 386, 392–94, 400, 402–3 White v Garden (1851) 10 CB 919 (CP) . . . . . . . . . . . . . . . . . . . . . . . . . . 370, 372 White v Jones [1995] 2 AC 207 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . 187–88, 213 White & Carter (Councils) Ltd v McGregor [1962] AC 413 (HL Sc) . . . . . . . . 175 Whitehorn Brothers v Davison [1911] 1 KB 463 (CA) . . . . . . . . . . . . . . . . 370–72 Winson, The [1982] AC 939 (HL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272, 285 Wood v Sutcliffe (1851) 2 Sim (NS) 163 (HC of Chancery) . . . . . . . . . . . . . . . 434 Woodward v Hutchins [1977] 1 WLR 760 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 Woolwich Equitable Building Society v IRC (No 2) [1993] AC 70 (HL) . . . . . . . 101, 269–72, 279, 281, 284, 287, 289, 303, 305, 307–8, 311, 314–16, 318 Workers Trust & Merchants Bank Ltd v Dojap Investments Ltd [1993] AC 573 (PC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Wright v Lawes (1801) 4 Esp 82 (KB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 Yeoman’s Row Management Ltd v Cobbe [2006] 1 WLR 2964 (CA) . . . . 250, 252 Zucker v Tyndall Holdings plc [1992] 1 WLR 1127 (CA). . . . . . . . . . . . . . . . . 409 Zuhal K, The [1989] 1 Lloyd’s Rep 151 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276

United States of America Action Mechanical Inc v Deadwood Historic Preservation Commission 652 NW 2d 742 (SD 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Atchison, Topeka & Santa Fe Railway Co v O’Connor 22 US 280 (1911) . . . . 271 Bean v Steuart Petroleum Co 224 A 2d 295 (Md 1966) . . . . . . . . . . . . . . 325, 327 Boesiger v Freer 381 P 2d 802 (Idaho 1963) . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Boomer v Muir 24 P 2d 570 (Cal App 1933) . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Bunge Corp v Manufacturers Hanover Trust Co 286 NE 2d 903 (NY 1972) . . 329 Burdick v Independent School District No 52 of Oklahoma County 702 P 2d 48 (Ok 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Burt Rigid Bo Inc v Travelers Property Casualty Corp 302 F 3d 83 (2 Cir 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Cancellation of Stabio Ditch Water Right on Spearfish Creek, In re 417 NW 2d 391 (SD 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Capitol Records Inc v Mercury Records 221 F 2d 657 (2 Cir 1955) . . . . . . . . . 200 nd

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Developers Three v Nationwide Ins Co 582 NE 2d 1130 (Ohio CA 1990) . . . . 188 Dickau v Town of Glastonbury 242 A 2d 777 (Conn SC 1968) . . . . . . . . . . . . 319 Dickerson v Colgrove 100 US 578 (USSC 1879) . . . . . . . . . . . . . . . . . . . . . . . . 325 Edwards v Lee’s Administrators 96 SW (2d) (Ky CA 1936) . . . . . . . . . . . . . . . . 95 Federal Sugar Refining Co v US Sugar Equalizing Board 268 F 575 (DCNY 1920) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Ferro v Society of St Pius X 149 P 3d 813 (Idaho 2006) . . . . . . . . . . . . . . . . . . 321 Franksen v Crossroads Joint Venture 515 NW 2d 794 (Neb 1994) . . . . . . . . . . 326 Geddes v Mill Creek County Club 751 NE 2d 1150 (Ill 2001) . . . . . 322, 325, 327 General Tire Co v Standard Accident Insurance Co 65 F 2d 237 (8 Cir 1933) . 323 Goodman v Dicker 169 F 2d 684 (DC Cir 1948) . . . . . . . . . . . . . . . . . . . . . . . 334 Gordinier v Aetna Cas & Sur Co 742 P 2d 277 (Ariz 1987) . . . . . . . . . . . . . . . 332 Heckler v Community Health Services of Crawford County Inc 467 US 51 (USSC 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Henson (Jim) Productions Inc v John T Brady & Associates Inc 867 F Supp 175 (SD NY 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Hortman v Miamisburg 852 NE 2d 716 (Ohio 2006) . . . . . . . . . . . . . . . . . . . . 319 International News Service v Associated Press 248 US 215 (Sup Ct 1918) . . . . . 192, 196–97 Jacobs v Chicago Title Insurance Co 709 F 2d 3 (4 Cir 1983). . . . . . . . . . . . . . 329 Jaworski v Jaworski 95 A 2d 95 (Md 1953) . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 Jennings v Dunning 440 NW 2d 671 (Neb 1989) . . . . . . . . . . . . . . . . . . . . . . . 325 Kearns v Andree 139 A 695 (Conn 1928) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 Kimberly & European Diamonds Inc v Burbank 684 F 2d 363 (6 Cir 1982) . . 329 Lubbock Feed Lots Inc v Iowa Beef Processors Inc 630 F 2d 250 (5 Cir 1980) 328 McElroy v B F Goodrich 73 F 3d 722 (7 Cir 1996) . . . . . . . . . . . . . . . . . . . . . 328 Mahban v MGM Grant Hotels Inc 691 P 2d 421 (Nevada SC 1984) . . . . . . . . 323 Mannillo v Gorski 255 A 2d 258 (NJ SC 1969) . . . . . . . . . . . . . . . . . . . . . . . . 326 Matarese v Moore-McKormack Lines 158 F 2d 631 (2d Cir 1946) . . . 194–95, 197 Miller v Miller 478 A 2d 351 (NJ 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 `Moore’ Burger Inc v Phillips Petroleum Co 492 SW 2d 934 (Tex 1972). . . . . . 335 Mortvedt v State 858 P 2d 1140 (Alaska 1993). . . . . . . . . . . . . . . . . . . . . . . . . 319 Murphy v Murphy 714 A 2d 576 (RI 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 National Merchandizing Corp v Leyden 348 NE 2d 771 (Mass SC 1976). . . . . 188 National Safe Deposit S & T Co v Hibbs 229 US 391 (USSC 1913) . . . . . . . . . 329 National Sun Industries Inc v South Dakota Farm Bureau Insurance Co 596 NW 2d 45 (SD 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 Northwestern National Bank v Commonwealth 27 A 2d 20 (Pa 1942). . . . . . . 325 Olson Distributing Systems Inc v Glasurit America Inc 850 F 2d 295 (6 Cir 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Onassis v Christian Dior–NY Inc 472 NYS 2d 254 (NYSC 1984) . . . . . . . . . . 201 Palmer v Borg-Warner Corp 838 P 2d 1243 (Alaska 1992) . . . . . . . . . . . . 324, 328 Phyfer v San Gabriel Development Corp 884 F 2d 235 (5 Cir 1989) . . . . . . . . 323 Pittsburgh Athletic Club v KQV Broadcasting 24 F Supp 490 (DC WD Penn 1938) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 th

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Potesta v US Fidelity & Guaranty Co 504 SE 2d 135 (W Va 1998). . . . . . . . . . 336 Ricketts v Scothorn 77 NW 365 (Neb 1898). . . . . . . . . . . . . . . . . . . . . . . . . . . 334 S & H Hardware & Supply Co v Yellow Transport Inc 432 F 3d 550 (3 Cir 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 St Joseph’s Hospital and Medical Center v Reserve Life Insurance Co 742 P 2d 808 (Ariz 1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325, 327 Seidel v 18 East 17 Street Owners Inc 598 NE 2d 7 (NY 1992) . . . . . . . . . . . . 325 Shondel J v Mark D 853 NE 2d 610 (NY 2006) . . . . . . . . . . . . . . . . . . . . . . . . 328 Snyder v City of Minneapolis 441 NW 2d 781 (Minn 1989). . . . . . . . . . . 319, 331 Société Générale v Federal Insurance Co 856 F 2d 461 (2 Cir 1988) . . . . . . . . . 327 Stearns v Emery-Waterhouse Co 596 A 2d 72 (Me 1991) . . . . . . . . . . . . . . . . . 335 Stohr v Randell 505 P 2d 1281 (Wash 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Tenner v Carmack 181 SW 2d 455 (Ky 1944). . . . . . . . . . . . . . . . . . . . . . . . . . 323 Triple Cities Construction Co v Maryland Casualty 151 NE 2d 856 (NY 1958) 326 Ultramares Corp v Touche 174 NE 441 (NYCA 1931) . . . . . . . . . . . . . . . . . . . 330 Utschig v McCone 114 NW 2d 854 (Wis 1962) . . . . . . . . . . . . . . . . . . . . . 319–20 Val-Land Farms Inc v Third National Bank in Knoxsville 937 F 2d 1110 (6 Cir 1991). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Vickers v Peaker 300 SW 2d 29 (Ark 1957) . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Vincent v Lake Erie 124 NW 221 (Minn SC 1910). . . . . . . . . . . . . . . . . . . . . . 186 Vu v Prudential Property & Casualty Insurance Co 33 P 3d 487 (Cal 2001) . . 325, 331, 333, 336 W v W 728 A 2d 1076 (Conn 1999); 779 A 2d 716 (Conn 2001). . . . . . . 324, 335 WCVB-TV v Boston Athletic Ass 926 F 2d 42 (1 Cir 1991) . . . . . . . . . . . . . . . 201 Weiss v Rojanasathit 975 SW 2d 113 (Mo 1998) . . . . . . . . . . . . . . . . . . . . . . . 322 Young v Amoco Production Co 610 F Supp 1479 (ED Tex 1985); aff’d 786 F 2d 1161 (5 Cir 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Ypsilanti Township v General Motors Corp 506 NW 2d 556 (Mich App 1993) 335 Zacchini v Scripps-Howard Broadcasting Co 433 US 569 (1977) . . . . . . . . . . . 200 rd

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Australia Builders Licensing Act 1971 (NSW) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporations Act 2001 (Cth) s 182 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s 232(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land Title Act 1984 (Qld) s 185(1)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land Title Act 1994 (Qld) s 184(2)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land Title Act 2000 (NT) s 188(2)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land Titles Act 1980 (Tas) s 41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property Law Act 1974 (Qld) ss 232–33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Property Act 1886 (SA) s 72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ss 186–87. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Property Act 1900 (NSW) s 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of Goods Act 1896 (Qld) s 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer of Land Act 1893 (WA) s 134 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer of Land Act 1958 (Vic) s 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

251 347 347 357 349 349 349 232 349 349 349 228 232 349 349

Canada Charter of Rights and Freedoms 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Estate Administration Tax Act 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306

European Union European Convention for the Protection of Human Rights and Fundamental Freedoms 1950 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439

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Art 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 Art 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439

Ireland Registration of Title Act 1964 s 123(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387

Israel Privacy Law 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 s 2(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

New Zealand Companies Act 993 s 248(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s 248(c)(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractual Remedies Act 1979 s9........................................................ Insolvency Act 2006 s 64 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property Law Act 1952. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s 129 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s 129A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property Law Act 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ss 321–24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s 324(1)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s 325 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

374 374 367 373 253 253 253 253 253 253 253

United Kingdom Bill of Rights 1688 . . . . . . . . . . . . . . . . . . . . . . 271, 287, 299, 301, 304, 315, 318 Civil Aviation Act 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Human Rights Act 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193–94, 202, 439 Insolvency Act 1986 s 127(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 s 284 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 s 306. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Land Registration Act 1925 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Law Procedure Act 1852 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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Law of Property Act 1925 s 60(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387 Limitation Act 1980 s 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Lord Cairns’ Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438 Merchant Shipping Act 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Statute of Frauds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168, 397 Statute 21 Jac. I, c. 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Supreme Court Act 1981 s 35A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270

United States of America Constitution First Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

Restatements Principles of the Law of Family Dissolution 2002 § 3.03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 Restatement (Second) of the Law of Contracts (1987) Ch 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 § 240 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Restatement (Third) of the Law of Economic Torts and Related Wrongs, Council Draft No 1 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 § 8, Comment e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 § 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 § 9(3)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 § 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 Restatement (Third) of the Law of Property: Servitudes (1989). . . . . . . . . . . . . 322 § 2.10(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 Restatement of the Law of Restitution (1937). . . . . . . . . . . . . . . . . 6, 68, 171, 188 § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 121 § 107 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Restatement of the Law of Restitution: Quasi-Contracts and Constructive Trusts (1937) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 Restatement (Third) of the Law of Restitution and Unjust Enrichment, Council Draft No 6 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 § 44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Restatement (Third) of the Law of Restitution and Unjust Enrichment, Discussion Draft (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49, 68–70 Ch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26, 69, 121

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§ 1, Comment (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68, 121 Restatement (Third) of the Law of Restitution and Unjust Enrichment, Tentative Draft No 3 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170, 181 § 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 Restatement (Third) of the Law of Restitution and Unjust Enrichment (Tentative Drafts) (2000–06) § 10, Comment (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 Restatement (Second) of the Law of Torts 1965 . . . . . . . . . . . . . . . . . 322, 325–27 §§ 652C-H. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 § 872 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321, 329 § 894 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321, 333 § 894(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 § 894 Comment b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 § 894 Illustration 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 § 894 Illustration 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 § 894 Illustration 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Restatement (Third) of the Law of Unfair Competition (1995) § 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197, 201 §§ 46–49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

1 In Memoriam Professor Peter Birks Regius Professor of Civil Law, University of Oxford* I N MEMORI AM

ROS S GRANTHAM † A N D C H A R L E S R IC K E T T ‡ ROS S GRANTHAM AND CHARLES RI CKETT

P

P R OFES S OR P ETER BR IAN Herrenden Birks, Regius Professor of Civil Law at the University of Oxford and paterfamilias of the modern law of restitution, died on 6 July 2004 at the age of 62. Peter was, quite simply, one of the finest academic lawyers of his or any other generation. His untimely death from cancer is an enormous loss not only to those who knew him as a friend, or were intellectually inspired by him, but to the legal community in general. Peter Birks’s university education began at Trinity College, Oxford. After a short stint in the United States as a teaching associate, he returned to England and completed a Master of Laws degree at University College, London. It was here, under the sharp guidance of George Webber, that Peter first came into contact with the subject of restitution. Peter’s first academic post was also at UCL, a connection that Peter always cherished. He was elected a Fellow of UCL in 1993. However, Peter’s first love institutionally was always Oxford, and in 1971 he was appointed to a tutorial fellowship at Brasenose College, where he remained until 1985. It was during his time at Brasenose, which Peter was later to describe ‘a wonderful place to be and to be a lawyer’, that he began to formulate his conceptual understanding of the law of restitution. His ideas, which were forged in his exacting undergraduate tutorials and inspirational postgraduate BCL seminars, and in several important early journal articles, were brilliantly articulated in 1985 in his seminal (and self-deprecatingly

* The first version of this tribute was published in (2004) 21 New Zealand University Law Review 193. † Professor of Commercial Law, The University of Queensland. ‡ Sir Gerard Brennan Professor of Law and Dean of Law, The University of Queensland.

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titled) work, An Introduction to the Law of Restitution.1 This work, which offered a deep and structural account of this ‘undiscovered’ area of private law, was almost singly responsible for the very quick emergence of a coherent law of restitution. While Peter always regarded himself as working in the field first ploughed in England by Robert Goff and Gareth Jones, whose textbook The Law of Restitution2 had first appeared in 1966, it was Peter’s work that gave the law of restitution the conceptual foundations that were soon to persuade academics and judges alike that restitution ‘ranks next to contract and tort as part of the law of obligations’.3 In 1985, Peter left Oxford to take up the Regius Chair of Civil Law at Edinburgh University. The civilian heritage of Scots law made Edinburgh an attractive destination, given Peter’s enduring love of Roman law, which had been carefully nurtured by his friendship with the outstanding Roman lawyer JAC (Tony) Thomas at UCL, and by his time at Oxford where the teaching and study of Roman law was still very strong. While at Edinburgh, he and Grant McLeod produced an important translation of Justinian’s Institutes.4 Peter’s attachment to Roman law stemmed from two things. First, he believed passionately that Roman law was the best means of introducing students to the overall structure and architecture of a legal system, and in particular of the private law. It remained a source of pride to Peter that a majority of law students at Oxford elect to do the first-year Roman law course. Secondly, the taxonomic structure given to Roman law by Gaius and Justinian held a deep attraction for Peter. Much of Peter’s later work especially was concerned with trying to reveal, and if necessary create, a rational structure of the common law. This project, which culminated in the publication of English Private Law,5 brought with it, however, considerable criticism, particularly from those who rejected rationality in favour of history, policy-based law making or simply judicial intuition. Nevertheless, the insights revealed in Peter’s ‘architectural’ or taxonomic scholarship have had far-reaching implications for the law and now stand as a bulwark against, and a deep challenge to, those unable or unwilling to see the law as anything more than ‘policy’ or a jumble of all types of considerations. After a year at Southampton University, Peter was appointed to the Regius Chair of Civil Law at Oxford and received a fellowship at All Souls College, in 1989. This was public recognition of the profound effect of his scholarship, both in restitution and in Roman law. Yet, it was in the period following his return to Oxford that Peter’s scholarly and academic 1 2 3 4 5

(Oxford, Clarendon Press, 1985). R Goff and G Jones, The Law of Restitution (London, Sweet & Maxwell, 1966). Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221, 227. P Birks and G McLeod, Justinian’s Institutes (London, Duckworth, 1987). P Birks (ed), English Private Law (Oxford, Oxford University Press, 2000).

In Memoriam

3

activities were to reach their peak, and that his work was to reverberate internationally. The restitution seminars offered for the BCL, which had ceased in 1981, resumed and a steady stream of the Commonwealth’s brightest students passed through Peter’s classes. These seminars, which quickly achieved legendary status, were both terrifying in their depth and intensity and inspiring in their intellectual stimulation. There is a tendency in modern legal education, at least in Australasia, to see the law degree as little more than a ticket to practise, and thus as focused on the delivery of content and ‘skills’. Those who have had the privilege of sitting under Peter’s dynamic tutelage understand just how impoverished a view of legal education that is. Peter’s commitment to the law, which he regarded as a vocation rather than merely a job, extended well beyond teaching and research. On his return to Oxford, he became heavily involved in administrative matters. He was Honorary Secretary of the Society of Public Teachers of Law (now the Society of Legal Scholars) for seven years, and in that role almost single-handedly transformed what had become a rather staid organisation into a vibrant and active learned society. The revival was largely achieved through modelling the core business of legal scholars and teachers, being the examination of a range of key legal issues, by holding seminars and conferences, and publishing the books resulting from those activities. Peter also devoted vast amounts of energy and time to establishing the Oxford Institute of Legal Practice, which was founded in 1994. The Institute, which teaches the professional admission course, reflected Peter’s belief in the necessity of a sound academic basis for legal practice. It is, however, as a scholar that Peter Birks will be most remembered. His work on the law of restitution was both truly seminal and profoundly original. His scholarship was characterised not only by its incisive analysis, which could cut through the thickets of detail and get to the root of the matter, but also by an exposition that conveyed his deep passion for the law. Birksian prose was unique and contained some of the most memorable lines in modern legal literature. As a scholar, Peter was never afraid to change his mind or admit that he was wrong. His views were constantly evolving, and in his last major work before his death, Unjust Enrichment,6 he recanted the central tenets of his earlier work. No doubt influenced by his work on the taxonomy of the law and his life-long interest in Roman and civilian law, Peter rejected the casuistic approach to the law of restitution that he had been so dominant in both articulating and getting widely accepted. He retreated from his earlier view that the reasons for restitution were found in the cases, in favour of a more abstract civilian approach that identified the reason for restitution as simply an ‘absence of legal basis’. While for some this change was seized 6

(Oxford, Clarendon Press, 2003) and (Oxford, Clarendon Press, 2nd edn, 2005).

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upon merely as proof that the law of restitution was an imposter, or that the Birksian analysis of restitution was simply always wrong, Peter’s willingness to give up long-held views, for which he had fought so energetically, in the face of superior rationality and reason is the mark of a great mind. In total, as can be seen in the list of his publications included at the end of this volume, Peter published more than 120 articles and notes, and wrote or edited 25 books. Nothing he ever wrote was not worth reading! Unlike so much modern legal writing, the challenge in Peter’s work was immense, and the argument always induced a reaction. Peter Birks’s influence on the law, as already indicated, was not limited to Britain. Students from all over the world went to Oxford, often just for the experience of being taught by Peter. In particular, Peter was a popular and much loved doctoral supervisor who was happy to spend many hours with students discussing their (and his) views. The numerous books resulting from those theses are testimony to the exacting standards he expected of his students. He was also a frequent visitor to universities around the world, and he visited New Zealand and Australia on several occasions. In 1997, Peter was a University of Auckland Distinguished Visitor and the Legal Research Foundation Fellow at Auckland Law School. It was during this visit that Peter gave a series of lectures outlining his controversial view on the relationship between the law of property and the law of unjust enrichment. The lectures were published as a major article, ‘Property and Unjust Enrichment: Categorical Truths’.7 In 1999, Peter was the Centennial Visiting Fellow at the Victoria University of Wellington Law Faculty. The public lectures he delivered during that visit were published as The Foundations of Unjust Enrichment: Six Centennial Lectures.8 Later, in 2002, he taught an LLM class at Auckland. He was set to return in 2004. He liked New Zealand very much, and often commented on the high standard of the academics and students he met there. Peter Birks was, quite simply, an outstanding teacher, a genuinely great scholar, and a warm and caring person. As his students, and later as his friends, we were inspired by his passion for the law, his quest for rationality and principle, and his generosity of spirit. We are but two of many like this. Along with those many, we will miss him enormously. The common law has lost one of its greatest champions, and academic law one of its most prized treasures. Peter Brian Herrenden Birks, QC, DCL, FBA, academic lawyer, born 3 October 1941; died 6 July 2004.

7 8

[1997] New Zealand Law Review 623. (Wellington, Victoria University Press, 2002).

2 Unjust Enrichment—Reason, Place and Content UNJ US T ENRI CHMENT—REAS ON, PLACE AND CONTENT

ROSS G RANTHA M AND C H AR L E S R IC K E T T ROS S GRANTHAM AND CHARLES RI CKETT

T

H E E S S AY S C O L L E C T E D in this volume are presented in honour of Professor Peter Birks by eminent scholars drawn from what might loosely be described as the colonies of the common law empire. Whether as a student, colleague or protagonist, all of the contributors have engaged with Birks’s work and have in turn been affected by it. Although Birks’s scholarly interests included Roman law, legal history and legal education, the essays collected here deal with those aspects of his work for which he is probably best know: the law of unjust enrichment and the taxonomy of private law. While the essays naturally reflect the particular interests of the contributors, they also address in different ways and from different viewpoints three broad issues: why do we permit restitutionary recovery?; where does the law of unjust enrichment fit within private law?; and when will restitution be granted?

I

T H E B I RT H O F A N E W S U B J E C T

The law has always provided for the restitution of benefits that the defendant cannot in justice retain. Although for much of common law’s history the division of the private law of obligations into either contract or torts has assumed that the principal concern is with compensation, the range of remedial responses has always included one that focused upon the defendant’s gain rather than the plaintiff’s loss. However, while the existence of restitutionary remedies has never been seriously doubted, it has proved difficult to identify either the causes of action or events to which this restitutionary remedy is an appropriate response, or the principles that best explain it. In the common law world, the first serious attempts to provide a coherent treatment of the law of restitution were by James Barr Ames and

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William Keener.1 However, it was not until the publication of the American Law Institute’s Restatement of the Law of Restitution in 1937 that it could be said that the law of restitution as a coherent subject had emerged. Such was the influence of the legal realist movement in the United States, and in particular in respect of its critique of doctrinal scholarship, however, that no sooner had restitution emerged than it sank back into obscurity. Restitution as a discrete legal subject was not to re-emerge until the publication of Robert Goff and Gareth Jones’s The Law of Restitution in 1966.2 While Goff and Jones identified the principle of unjust enrichment as underpinning the law, the real object of their work was to bring together in one textbook the mass of conflicting case law rather than to offer a sustained conceptualisation of the subject. This latter task had to await Peter Birks’s An Introduction to the Law of Restitution in 1985.3 Birks’s stated aim was to ‘cut away’ the detail of the cases and to ‘reveal the skeleton of principle which holds it together’.4 In doing so, Birks followed Goff and Jones and identified as the principle which animates and unifies the law of restitution that of unjust enrichment. However, unlike Goff and Jones, Birks sought both to explain the content of that principle and to reshape the law by taking the principle seriously as an organisational tool. The Birksian conception of the principle of unjust enrichment is characterised by three features. First, it seeks to explain a large range of cases that are factually disparate but which give rise to a response that is restitutionary in its effect. That is, the circumstances that are said to make a transfer of wealth ‘unjust’ are very broad, ranging from mistake, through pressure and unconscientious behaviour, to considerations of public policy. Birks’s conception thus necessarily relies on a fulsome notion of ‘unjust’ to establish the unity of these instances of ‘unjustness’. This was largely a consequence of the range of cases that needed to be explained, and of what Birks saw as the ‘common sense’ immanent in the cases.5 Secondly, the scope of unjust enrichment is not constrained by the existence of other grounds for recovering the enrichment. Thus, the mere fact that the defendant has agreed to restore the enrichment or that the plaintiff could rely upon his or her subsisting proprietary rights in the subject matter of the enrichment did not preclude an alternative analysis of recovery on the ground of unjust enrichment. Thirdly, unjust enrichment includes not only the core case of a direct transfer of wealth from the plaintiff to the defendant, but also cases where

1 See A Kull, ‘James Bar Ames and the Early Modern History of Unjust Enrichment’ (2005) 25 Oxford Journal of Legal Studies 297. 2 R Goff and G Jones, The Law of Restitution (London, Sweet & Maxwell, 1966). 3 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985). 4 Ibid, 1. 5 Ibid, 1–2.

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the defendant’s enrichment comes to him or her only indirectly from the plaintiff. Although more recently Birks has sought to revise significant aspects of his initial conceptualisation,6 the influence of his first book and his subsequent work in fleshing out the detail cannot be underestimated. Even for those who profoundly disagree with his views, the conceptual schema he articulated has formed the framework within which pretty much all the debate (and dissent) about the nature of the law of unjust enrichment and the organisation of private law has since taken place. The challenge Birks’s work offered, and still offers, was the principal factor in a huge leap forward in private law scholarship, particularly within the Commonwealth.

II

UNFINISHED BUSINESS

The period from the publication of An Introduction to the Law of Restitution in 1985 until its author’s untimely death in 2004 saw major advances in our understanding of the organisation and purposes of private law, and in the articulation of a coherent law of restitution animated by the principle of unjust enrichment. However, as Birks demonstrated in his last work published before his death,7 far from having settled matters, the learning acquired in this period was merely the first faltering footstep at the beginning of a much longer and far more challenging journey. Somewhat ironically, although entirely in keeping with his commitment to intellectual rigour, in laying bare the skeleton of the law of unjust enrichment and the general structure of private law, Birks has made possible a plurality of views on almost all of the questions now facing private law. These questions may be organised under three broad headings.

A The Normative Basis of Restitutionary Liability Perhaps the most fundamental of these questions is: ‘Why restitution?’ That is, what is the philosophical or moral reason why the recipient of an enrichment ought to make restitution? In asking this question, we are looking for a reason for action that transcends the bare coercive power of the state to force the defendant to make restitution and morally explains, justifies and supports the positive law in terms that connect with the fundamental social, political and economic values immanent in society. In the particular context of the law of unjust enrichment, it is these philosophical P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn, 2005). In the Preface to the first edition of Unjust Enrichment (Oxford, Clarendon Press, 2003), xiv, Birks declared: ‘Almost everything of mine now needs calling back for burning.’ 6 7

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and moral considerations that will fundamentally explain why the defendant’s enrichment is unjust. A number of theorists have suggested that the normative basis of restitutionary liability is to be found in instrumentalist considerations.8 However, this approach seems unable to account fully for all of the features that we presently take to be essential to restitutionary liability. Thus, for example, while such accounts are able to explain why it is that the recipient must be stripped of the enrichment, they do not immediately seem to explain why that enrichment must be restored to the particular plaintiff as opposed to some other person. More promising is the idea that restitutionary liability is a manifestation of the concept of corrective justice. However, this approach is also not without its difficulties. Thus, for example, restitutionary liability is generally accepted as being strict. However, as the idea of corrective justice seems necessarily to entail some infringement by one party of a right of another, prima facie it does not seem able to explain or justify strict restitutionary recovery. For example, in the paradigm case of the mistaken payment, T transfers wealth to R due to a mistake. At the moment of receipt, however, in what sense has R’s receipt infringed T’s right? In the absence of some prior duty not to receive the wealth, or a pre-existing duty to restore it, R cannot be said to have infringed T’s right. There appears thus to be no disruption of the correlativity between T and R to correct. The principle of unjust enrichment thus seems to operate too late in the story to be a manifestation of the idea of corrective justice. Birks, of course, did not directly address the normative basis of restitutionary liability. His focus was on explaining and rationalising the content of the law of restitution, a task that he saw as a necessary precursor to more detailed elaboration.9 However, the identification of the philosophical and moral justification of restitutionary liability is essential to the theoretical stability of the law of unjust enrichment. Although the rules and doctrines of law may only ever imperfectly reflect the pre-legal moral and political imperatives of which they are a manifestation, these pre-legal considerations nevertheless represent the lodestone against which the content of the law and any developments in it must be assessed. At present, however, it appears that the identification of the normative basis of restitutionary liability remains largely illusive.

8 D Klimchuk, ‘Unjust Enrichment and Corrective Justice’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (Oxford, Hart Publishing, 2004); H Dagan, The Law and Ethics of Restitution (Cambridge: Cambridge University Press, 2004). 9 Birks, n 3 above, 1–2.

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B The Place of Restitution in Private Law The emergence of a discrete law of restitution inevitably necessitated a reconsideration of the organisation of the whole of private law. For much of the history of common law, and of private law in particular, the issue of the interrelationship and organisation of legal concepts was of little concern, either practically or theoretically. The writ system did the job of structuring the law and largely precluded deeper theorising. However, with the abolition of the forms of action by the Law Procedure Act 1852, Victorian lawyers were forced to devise new ways of organising the law, and hence of framing their pleadings. The principal organisational structure adopted was that obligations in private law were either contractual or tortious. A discrete law of unjust enrichment challenged this bipartite division and presented difficult questions about how two categories were to become three. Birks’s work on taxonomy largely set the intellectual agenda of this debate. In focusing on issues of organisation and structure, and of how different parts of private law relate to one another, Birks’s work changed profoundly the very nature of private law scholarship. It forced private law scholars to see their subject not as series of discrete, unrelated doctrines, but as a complex system that ought to make sense as a whole. In doing so, Birks’s taxonomic project challenged long-held conceptions about the shape, content and purpose of parts of private law. Thus, for example, the Birksian taxonomy has no place for a category called equity.10 Even more fundamentally, it challenged the distinctive methodology of common law. The idea of an overarching organisation, even if it looks for its organising principles in the decided cases, nevertheless transcends those posited rules and seeks to remake them in a way that is vaguely civilian and thus apparently alien to common law.11 For these reasons, the Birksian taxonomic project remains a deeply contested one. While many scholars are committed to working out a coherent exposition of the entirety of private law, there are those who question the underlying premise of a formal taxonomy of private law. Any formal classification necessarily assumes that what is being classified is capable of systematic and internally coherent organisation. However, it is suggested that this assumption is false. Some theorists suggest that common law is too historically contingent and too complicated to be susceptible of organisation into discrete, mutually exclusive categories.12 Of course, only time and further debate will tell whether or not the Birksian taxonomy was ultimately correct. Although it would amount to a 10 11 12

Birks, n 7 above, 24. Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 544 (HCA). S Waddams, Dimensions of Private Law (Cambridge, Cambridge University Press, 2003).

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startling admission, common law may indeed prove itself to be beyond rational organisation. However, even if that does turn out to be the case, the real and lasting value of the Birksian taxonomy lies in the attention it has brought to issues of structure and organisation in common law. If private law does remain a miscellany of randomly evolved intuitions, it will remain so only as a result of rational deliberation rather than because of some romantic or xenophobic belief in the superiority either of a particular and highly contingent history or of pragmatism over reason. The taxonomy developed by Birks is also contested at the more particular level of where and how it draws the boundaries between the various component parts of private law. This debate has been particularly fierce in two areas. The first concerns the relationship between the law of property and the law of unjust enrichment. The central question here is the identification of the proper cause of action in those cases where the transfer of wealth to the defendant nevertheless leaves intact the plaintiff’s rights in rem in the transferred asset representing the wealth. In such cases, it is both important and difficult to know whether a plaintiff’s claim is one to vindicate the subsisting property right in the asset, or whether the claim arises from establishing that the transfer represented an unjust enrichment of the defendant at the expense of the plaintiff. In Birks’s view, while the vindication of an existing property right is not in itself a case of unjust enrichment, the retention of title by the plaintiff does not preclude a claim in unjust enrichment. This is so because, first, property rights are only a response, not a source of rights in themselves, and, secondly, the law accepts the concurrency of liabilities in the law of property and the law of unjust enrichment.13 This aspect of the Birksian taxonomy has met vigorous resistance. Thus, some theorists suggest that there can be no unjust enrichment if title does not pass to the defendant, as it is only by the transfer of title that the defendant can be said to be enriched at the plaintiff’s expense.14 Others, including us, suggest that the law of property represents a necessary and logical limit to the scope of unjust enrichment. Where the plaintiff retains actionable property rights in the subject matter of the wealth transferred to the defendant, there is neither the need nor the room to invoke the concept of unjust enrichment. In such cases, the plaintiff’s persisting property rights are the source of the right to recovery.15 Nor has this aspect of Birks’s taxonomic understanding found favour in the authorities. 13 P Birks, ‘Property and Unjust Enrichment: Categorical Truths’ [1997] New Zealand Law Review 623; Birks, n 6 above, 63–9. 14 W Swadling, ‘A Claim in Restitution?’ [1996] Lloyd’s Maritime and Commercial Law Quarterly 63. 15 R Grantham and C Rickett, Enrichment and Restitution in New Zealand (Oxford, Hart Publishing, 2000) 30–40. See also G Virgo, The Principles of the Law of Restitution (Oxford, Oxford University Press, 2nd edn, 2006) ch 20.

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The preponderance of authority, especially decisions such as Trustee of Jones v Jones16 and Foskett v McKeown,17 now seems to assume that where the plaintiff retains rights in rem in the asset transferred to the defendant the basis (cause of action) of recovery is those subsisting property rights.18 The second area where the Birksian taxonomy has generated heated debate is in relation to the place of equity. In Birks’s taxonomy, which was organised around legally significant events, there could be no place for a purely historical category such as ‘equity’. Particularly in Australia, where equity survived as a separate jurisdiction longer than anywhere else in the common law world, the commitment to the preservation of equity as a discrete body of law runs very deep and at times has produced a vitriolic rejection not only of Birks’s taxonomy,19 but also of a law of unjust enrichment.20 The effort to maintain the distinctiveness of equity as a major category of law has led to attempts to deny the existence of a principle of unjust enrichment, to limit the scope of unjust enrichment to common law claims and to attempt a ‘reverse takeover’ by recharacterising the principle underlying the law of restitution in more equitable terms such as unconscientiousness.21

C

The Content of the Principle of Unjust Enrichment

The basic doctrinal model of the law of unjust enrichment developed by Birks in An Introduction to the Law of Restitution was extremely influential in shaping the emergent law of unjust enrichment. In offering a coherent, elegant and accessible account of a hitherto confused mass of rules and doctrines, the Birksian model attracted scholars and judges alike. During the 1990s, the central features of the Birksian model were thus adopted by the superior courts of virtually every common law jurisdiction,22 with the exception of the United States. In the area of restitution, [1997] Ch 159 (CA). [2001] 1 AC 102 (HL). See P Millett, ‘Jones v Jones: Property or Unjust Enrichment’ in A Burrows and A Rodger (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006) ch 13. 18 See P Millett, ‘Proprietary Restitution’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Thomson, 2005) ch 12. 19 See, eg the comments of Dyson Heydon in the Preface to R Meagher, D Heydon and M Leeming, Meagher, Gummow and Lehane’s Equity Doctrines an Remedies (Sydney, LexisNexis, 4th edn, 2002) xi. 20 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (HCA); Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22. 21 R Grantham, ‘The Equitable Basis of the Law of Restitution’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Thomson, 2005) ch 14. 22 Even in Canada, which had adopted an ‘absence of juristic basis’ formulation, this was applied in a way consistent with the approach taken in the United Kingdom, Australia and New 16 17

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there was thus something of a common law ius commune. More recently, however, as scholars and courts have explored in greater depth and detail the elements of this doctrinal model, there has developed a range of views as to both the proper doctrinal structure and the content of the law. The disintegration of the ius commune has two aspects. First, increasingly divergent views have emerged as to what material is properly encompassed by the law of unjust enrichment and, in particular, where its outer edges lie. It is now possible to identify as least three different views as to the scope of the subject.23 At one end of the spectrum, there is the Birksian model. This has been described as a ‘broad’ view because not only does it seek to explain a very large number of cases, but also the scope of unjust enrichment is not constrained by the existence of other grounds for recovering the enrichment. At the other end of the spectrum are the self-styled ‘restitution sceptics’. This scepticism takes two forms. There are those who deny altogether the existence of the law of unjust enrichment as a coherent body of law. In this view, the various instances of restitutionary recovery are, as they were for centuries, a miscellany capable of explanation only in terms of a range of underlying considerations. The other principal form of restitution scepticism is borne of a commitment to the preservation of equity as a discrete body of law. The effort to prevent the assimilation of equity rules within a law of restitution has led to attempts either to deny the existence of a principle of unjust enrichment or to recharacterise the principle underlying the law of restitution in more equitable terms.24 Lying between these polar opposites is the so-called ‘narrow’ view.25 This view shares with the broad view an acceptance of the unity of the law of restitution based on the principle of unjust enrichment. However, the narrow view also accepts the sceptics’ criticism that the factual disparity of the range of cases included by the broad view is such that a coherent and useful principle of unjust enrichment cannot possibly explain them all. Secondly, a sharp schism may now be developing as to the proper formulation of the reasons or justification for restitutionary liability. As articulated by Birks in An Introduction, the law recognised a range of particular ‘unjust factors’ as reasons why the law might grant restitution.

Zealand. See M McInnes, ‘Making Sense of Juristic Reasons: Unjust Enrichment After Garland v Consumers’ Gas’ (2004) 42 Alberta Law Review 399; M McInnes, ‘Unjust Enrichment, Juristic Reasons and Palm Tree Justice’ (2004) 41 Canadian Business Law Journal 103; L Smith, ‘The Mystery of “Juristic Reason”’ (2000) 12 Supreme Court Law Review (2d) 211. 23 S Hedley, ‘Unjust Enrichment: A Middle Course?’ (2003) 2 Oxford University Commonwealth Law Journal 181. 24 This branch of scepticism seems to be of Australian origin: Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (HCA); Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22. 25 See, eg Virgo, n 15 above; Grantham and Rickett, n 15 above.

Unjust Enrichment—Reason, Place and Content

13

The principle of unjust enrichment was merely the generic expression of these various nominate reasons. This bottom-up approach to the grounds that render an enrichment unjust stands in contrast to the civilian top-down approach that identifies as the single, overarching reason for restitution the absence of a legal basis for the defendant’s enrichment. Largely as a result of the criticism of the unjust factors approach offered by civilian commentators26 and the apparent preference expressed by the House of Lords in Kleinwort Benson Ltd v Lincoln City Council27 for the absence of legal basis approach, Birks felt compelled to recant his former position and adopt the absence of basis approach. In Canada, also, the Supreme Court of Canada now seems to have expressed a clear preference for the absence of legal basis approach.28 The fundamental question that now faces common law is: assuming that the absence of basis approach is in fact conceptually superior, can such an approach be accommodated within common law and at what cost? The law of unjust enrichment is not an isolated body of law and the changes needed to accommodate an absence of legal basis approach would affect large parts of private law within common law. In particular, any move to a civilian model will require that other areas of private law take on the burden of determining whether a transfer of wealth is reversible. For example, it will be the law of contract that decides if the putative contract under which the relevant transfer was apparently required is a valid juristic reason for the transfer. This is how the law of unjust enrichment is kept within bounds. It will also require a degree of precision and consistency as to the consequences of invalidating putative obligations.29 If restitution is based on the absence of a legal basis for the transfer, avoidance of the obligation pursuant to which the transfer was apparently made must lead inexorably to restitution. Such precise definition, however, is largely alien to common law. The real risk in moving to a civilian approach is that an absence of legal basis approach will be adopted and applied without making the necessary structural changes in other areas of private law. As Birks put it, this would be the ‘worst of both worlds’.30

26 See, eg S Meier and R Zimmermann, ‘Judicial Development of the Law, error iuris and the Law of Unjustified Enrichment—A View from Germany’ (1999) 115 LQR 556. 27 [1999] 2 AC 349 (HL). 28 Garland v Consumers’ Gas Co [2004] 1 SCR 629 (SCC). 29 T Krebs, ‘In Defence of Unjust Factors’ in D Johnston and R Zimmerman (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 86: ‘Where the general law determines that an obligation is void, or can be rendered void by one party’s unilateral act, restitution is a consequence. The general law is drafted with that consequence in mind.’ 30 P Birks, ‘Mistakes of Law’ (2000) 53 Current Legal Problems 205, 232.

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R E A S O N , P L ACE AN D C O N T E N T

As mentioned above, this volume of essays is offered to honour the enormous contribution made by Peter Birks to private law scholarship. This is not to say that the contributors agree with all or even most of Birks’s work. That is the last thing he would have wanted. Above all, Birks was a scholar and his concern was to find the best analysis even if that meant recanting his earlier views. The essays are organised loosely around the three broad issues identified above. The first two substantial essays explore the normative foundations of unjust enrichment and restitutionary liability. In the first essay, Ernest Weinrib offers an account of the principle of unjust enrichment in terms of the Aristotelian concept of corrective justice. This concept, supplemented by the Kantian notion of right, identifies the normative justification of restitutionary liability in mutual respect for the autonomy of the parties. It is thus a transfer of wealth that is not a true expression of the plaintiff’s freedom of choice, and the defendant’s acceptance of that transfer as something other than a voluntary transfer, that creates and justifies the restitutionary obligation. In the second essay, Kit Barker considers whether the moral starting point of the principle of unjust enrichment is that gains that are made at the expense of others are something that require justification or whether they are something that we are presumptively entitled to keep. In Barker’s view, the choice in starting point has profound implications for the current debate as to whether common law should adopt the civilian approach to the reason for restitution which asks simply whether the transfer lacked a legal basis. Barker argues that a move to an absence of legal basis approach would entail a fundamental structural shift for the law of unjust enrichment that would create a tension with the liberal foundations of common law generally. The next group of seven essays is devoted to the taxonomic question of the proper place of the law of unjust enrichment in the overall structure of private law. In the third essay, Mitchell McInnes considers the taxonomy of private law that Birks was so instrumental in developing, in the context of the Supreme Court of Canada’s restitution jurisprudence. In McInnes’s view, the Supreme Court’s approach, especially in relation to the intersection between unjust enrichment and constructive trusts and the alignment of causes of action and measures of relief, has failed due to the want of a coherent taxonomy. Emily Sherwin continues the taxonomic theme with what might be described as a meta-taxonomy of the different types and purposes of taxonomic accounts of private law. In Sherwin’s view, the particular taxonomy developed by Birks was an essentially formal taxonomy of posited legal rules whose aim is to lay out the law in a logical and

Unjust Enrichment—Reason, Place and Content

15

non-contradictory manner. The value of such a taxonomy lies, in Sherwin’s opinion, in the way it promotes communication and dialogue between the participants (judges, practitioners and academics) in the development of the law. Richard Sutton’s essay is also concerned with the methodological contribution of Birks’s scholarship, in particular its ‘dynamic’ aspect. Focusing on Birks’s An Introduction to the Law of Restitution, Sutton demonstrates how Birks offered two theses, one about the dynamics of law and the other about taxonomy and classification. While it is the latter aspect of his work that is better known, the theory that Birks demonstrated about how, within the positivist tradition, law can still develop through a dynamic relationship between the process of systematization and the process of law declaration is, Sutton argues, of equal, if not greater, importance. In the next essay, Hanoch Dagan offers a taxonomy of private law from a ‘realist’ perspective. While acknowledging the apparent contradiction in such a enterprise, Dagan seeks to highlight both the utility of taxonomic inquires to realist analyses and the general features of a realist, as opposed to a formal, taxonomy. These are that a realist taxonomy is dynamic in being in a perpetual state of revision to expose underlying preferences, that it has a preference for narrow categories that assist in making the law serve human needs, and that it is comfortable with categories that overlap. Stephen Waddams’s essay addresses the issue of taxonomy through a consideration of the interrelationship of the law of contract and the law of unjust enrichment. Although contract and unjust enrichment represent distinct bodies of law, they are categories that, in Waddams’s view, overlap and interrelate. Thus, in respect of claims arising within a contractual matrix, one cannot simply conclude that as mutually exclusive categories the mere existence of a contract necessarily excludes a claim in unjust enrichment. Rather, it is a matter of interpreting the contract, in light of the potential unjust enrichment of the parties, to determine if it was intended that restitutionary obligations be excluded. In the following essay, Daniel Friedmann looks at the role of unjust enrichment in creating or recognising entitlements. While the central function of unjust enrichment is usually understood to be the protection of entitlements already recognised by other areas of the law, Freidmann suggests that unjust enrichment is increasingly being used to create entitlements. Thus, restitutionary claims have been used to confer quasi-proprietary status on some contractual rights, good will, rights of performance and certain types of information. The final essay in this section is by Steve Hedley. Hedley’s concern is with what he labels the ‘new interpretative’ approach to legal analysis. The overall aim of this approach is to go from a large and possibly confusing mass of legal information to a relatively tight and coherent theory that is thought to lie behind it or justify it. In Hedley’s view, however, this

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approach underestimates the complexity and contingency of the law and the view that legal rules manifest many, often conflicting, purposes. The final group of essays deal with a wide range of issues arising within the law of unjust enrichment itself. First, Peter Butler analyses the recovery of advance payments made under contracts that are discharged for breach. Butler is concerned to explore how those cases that were analysed in terms of a failure of consideration would fare under an absence of legal basis approach. In Butler’s view, restitution of advance contractual payments is not only consistent with, but is more appropriately analysed in terms of, an absence of legal basis. Struan Scott’s essay on mistaken improvements to land and ‘almost contract’ cases takes issue with Birks’s treatment of these cases as cases of unjust enrichment. In Scott’s view, recovery in these cases turns far more crucially than Birks’s analysis suggested on the quality of the conduct of the parties. This, in turn, in Scott’s view, was driven by Birks’s focus on the law as a system at the expense of the detail of the cases. In this respect, the Birksian emphasis on uniformity and consistency comes at the cost of explaining the cases as they were decided. The focus of Simone Degeling’s essay is the so-called ‘policy-motivated’ unjust factors, which include ultra vires demands for tax and necessity. Degeling’s central thesis is that the inclusion of such matters as reasons for restitution runs the risk of destabilising the law of unjust enrichment. The potentially open-ended range of policy factors means that the law of unjust enrichment may become an incoherent miscellany of reasons for restitution. Restitution of ultra vires demands for tax is also the subject of John McCamus’s essay. Focusing principally on Canadian authorities, McCamus charts the development of a general rule granting recovery to taxpayers of taxes paid under ultra vires legislation. In rejecting the proposed immunity rule proposed in Air Canada v British Columbia31 by La Forest J, the Supreme Court of Canada has instead firmly grounded recovery on the basis of the high constitutional principle articulated and advocated by Birks as the underlying basis for recovery. In his essay on equitable estoppel, Mark Gergen suggests that in American law estoppel reflects a disparate range of considerations and principles. Consequently, the core criteria for its operation, a representation of fact and detrimental reliance, are necessarily somewhat slippery. However, to understand estoppel fully, one has to understand the role played by the remedial techniques of estoppel: that it is a shield and not a sword, that it is rule of evidence, and that it protects but does not create rights. These constrain the operation of estoppel and allow the criteria upon which it arises to remain open textured. 31

[1989] 1 SCR 1161 (SCC).

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Michael Bryan presents a critique of the treatment by Australian courts of claims by beneficiaries to the recovery of misappropriated trust assets. In treating these claims as being about the knowing receipt of trust assets, the courts mischaracterise them. Such claims are more naturally seen simply as the assertion by the beneficiary of its equitable property rights. This, in turn, has important implications for the interrelationship of claims to recover land held on trust and the concept of indefeasibility of title guaranteed by the Torrens land registration system. The availability of proprietary remedies for restitutionary claims is one of the most vexed aspects of the law of unjust enrichment. In his essay, Peter Watts takes issue with Birks’s claim that proprietary remedies ought to be available as a matter of course in all cases of ‘initial failure’ of the legal basis. In Watts’s view, proprietary remedies for unjust enrichment ought to be narrowly confined and the presumptive response to such claims ought to be personal. Watts sustains this view on the basis that Birks’s distinction between initial and subsequent failure of legal basis is unstable, and on a historical review of the availability of proprietary remedies in the case of misrepresentation. Eoin O’Dell’s essay also tackles proprietary matters, in the form of the resulting trust. The role and characterisation of the resulting trust remains contested. Birks and Chambers saw the resulting trust as a response to unjust enrichment. In O’Dell’s view, however, this fundamentally misconceives the roles of the donor’s intention and of the presumption thereof. The donor’s intention is not constitutive of the resulting trust, but instead is merely responsive to a trust which arises because of the existence of an underlying essential fact, such as a gift or an apparently failing trust. Rather, the resulting trust is best understood as responding to an apparent gift or the apparent failure of a trust. The final two papers in the collection take as their subject Birks’s influential Blackstone lecture.32 Stephen Smith focuses on Birks’s suggestion that Blackstone was wrong to treat court orders as ‘remedies’. He argues that in order to understand court orders it is necessary to distinguish clearly between their content and their existence. While Birks was correct to reject the characterisation of court orders as remedies in terms of their content, as a court order may merely confirm the existence of duties arising from not-wrongs, in terms of their existence—the circumstances that bring them into existence—it is correct to say, with Blackstone, that court orders are remedial. An examination of the most important categories of court orders shows that a court order will not be made except on proof of an actual or imminent wrong. Michael Tilbury’s focus is on Birks’s conclusion that the word ‘remedy’ ought to be purged entirely from the analytical vocabulary of law on the 32

P Birks, ‘Rights, Wrongs, and Remedies’ (2000) 20 Oxford Journal of Legal Studies 1.

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basis that it lacks a stable meaning. In Tilbury’s view, however, the term ‘remedy’ does have a core meaning, that of the rights generated by causes of action, whether wrongs or not-wrongs. Moreover, this understanding of remedy does not undermine the established classification of events from which rights arise, and he argues that replacing ‘remedy’ by ‘right’ will assist neither in obviating any distortion of the categories of wrongs and not-wrongs, nor in avoiding discretionary remedialism. *

*

*

As the essays in this collection demonstrate, Peter Birks’s work has had a profound impact on the content of private law and on private law scholarship. Whether or not one agrees with his particular attempt to systematise private law, one cannot dispute that his work re-energised research into private law and offered a conceptual and theoretical dimension that hitherto was sorely lacking. It is perhaps this more than any thing else that with his passing we do and will continue to most sorely miss.

Part 1

Why Restitution?

3 The Normative Structure of Unjust Enrichment THE NORMATI VE S TRUCTURE OF UNJ US T ENRI CHMENT

E R N E S T J WE I N R I B * ERNES T J WEI NRI B

I

T HE PRINCIPLE O F UNJUST E NRICHMENT

‘A

P ER S ON WHO has been unjustly enriched at the expense of another is required to make restitution to the other.’1 Although this principle of liability has recently become as firmly established in the common law jurisdictions as it has long been among civil law systems, its significance remains a matter of lively academic controversy. In the past few years, as unjust enrichment was entrenching itself in many common law jurisdictions, sceptical voices continued to be heard. Scholars argued that unjust enrichment adds little to the traditional arsenal of private law categories;2 that the idea of unjust enrichment is either hopelessly circular or is a conclusion based on unmentioned normative values that do the real work;3 and that the principle of unjust enrichment submerges within a common framework types of claims that should be governed by diverse principles.4 Despite being recognised as never before, unjust enrichment remains the most embattled of the bases of liability in private law. Such expressions of scepticism gain their traction from the mystery that lies at the heart of unjust enrichment: what makes a given enrichment unjust? This question concerns not merely the positive law, but the normative theory implicit in it, exposing a gap through which seep doubts about the nature and scope of the principle of unjust enrichment. Even proponents of unjust enrichment acknowledge the absence of a viable University Professor and Cecil A Wright Professor of Law, University of Toronto. Restatement of Restitution (St Paul, MN, American Law Institute, 1937) s 1. S Hedley, Restitution: Its Division and Ordering (London, Sweet & Maxwell, 2001). H Dagan, The Law and Ethics of Restitution (Cambridge, Cambridge University Press, 2004) 19. 4 P Jaffey, ‘Two Theories of Unjust Enrichment’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (Oxford, Hart Publishing, 2004) 39; C Wonnell, ‘Replacing the Unitary Principle of Unjust Enrichment’ (1996) 45 Emory Law Journal 153. * 1 2 3

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theory of the injustice that grounds this form of liability.5 Liability for unjust enrichment is unique among contemporary bases of liability in explicitly engaging some conception of justice. But what is that conception, and how is it related to the structure of liability that it supposedly underpins? That the basis of liability for enrichments refers explicitly to injustice has long been problematic. For many years the development of unjust enrichment was impeded by the suspicion that, once recognised as a category of liability, it would direct judges away from traditional legal reasoning to the amorphous exercise of legal discretion on unspecified grounds that vary according to one’s personal sense of justice.6 In response, Peter Birks insisted in his great exposition of the law of restitution that ‘unjust’ in this context looks not up to an abstract conception of moral and political values but down to the cases themselves,7 that it is ‘merely a general word expressing the common quality of those factors which, when present in conjunction with enrichment, have been held to call for restitution’.8 This vindication of the specifically legal nature of the liability from encroachment by a vague normative idea initially seems paradoxical. The point of postulating the category of unjust enrichment to begin with was to bring various instances of restitutionary liability—for benefits conferred under mistake, by coercion, where consideration has failed and so on—under a single unitary principle.9 The interpretation of ‘unjust’ as simply referring back to those instances would effectively dissolve that principle. Unjust enrichment, far from being the expression of a unifying normative idea, would then be no more than the label through which the original multiplicity of instances is maintained. Moreover, the reference to the injustice of the enrichment holds out the promise that 5

A distinguished commentator on the law of restitution has recently lamented: Lurking beneath the surface is an awkward question that needs to be answered by jurists: what is it that makes a particular enrichment unjust? It is a question which has not been answered in modern writing on the law of restitution. Indeed, most modern writing on the law of restitution is notable for its apparent indifference to theoretical issues. What is the notion of justice which underpins the law and its development? If this area of law is to be restyled the law of unjust enrichment, surely it cannot avoid openly addressing questions that relate to the conception of justice which underpins the law? Writers avoid the issue . . .

E McKendrick, ‘Taxonomy: Does it Matter?’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 627, 654. 6 ‘[T]he adoption of this concept . . . would clothe judges with a very wide power to apply what has been described as “palm tree justice” without the benefit of any guidelines. By what test is a judge to determine what constitutes unjust enrichment? The only test is his individual perception of what he considered to be unjust.’: Pettkus v Becker [1980] 2 SCR 834, 859 (per Martland J dissenting) (SCC). A similar note was sounded decades earlier in W Holdsworth, ‘Unjustifiable Enrichment’ (1939) 55 LQR 37, 49. 7 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985) 19. 8 Ibid, 99. 9 W Seavey and A Scott, ‘Restitution’ (1938) 54 LQR 29.

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unjust enrichment is a dynamic principle in the light of which the particular legal doctrines can be evaluated and developed. Such development has indeed taken place in the aftermath of the principle’s explicit recognition.10 In contrast, to regard the unjust aspect of the enrichment as a compendious allusion to the kinds of enrichment that the cases say are reversible is to treat unjust enrichment as a static reflection of what the law happens to be. In fact, Birks’s equation of ‘unjust’ with the situations where the law has called for restitution did not in his hands produce a fragmented or static presentation of unjust enrichment. On the contrary, it was accompanied by a dynamic and critical search for unity.11 Unjust enrichment was held out as a generic conception that defines the subject matter under discussion and disciplines the terms in which it ought to be discussed. Composing this generic conception are four elements: the defendant’s enrichment; the plaintiff’s being the person at whose expense the enrichment was made; the existence of a factor (such as mistake or compulsion) that vitiates the plaintiff’s intention to enrich the defendant; and the consideration of other issues that limit or provide defences against liability in particular cases.12 These elements (which Birks was not the first to articulate) can be regarded as the structural components of unjust enrichment. One arrives at them by abstracting from the particular instances of liability that historically existed as different restitutionary causes of action (money had and received, money paid to the defendant’s use, quantum meruit and so on) to the organising notions that characterise the more inclusive category of liability for unjust enrichment as such. Because they are structural elements, they must plausibly be seen as present in any case where this kind of liability is in order. In this way they provide ‘a shared and stable pattern of reasoning’13 that allows one ‘to detect important structural similarities between fact situations that are only superficially dissimilar’.14 The whole field of liability can therefore be reconstituted by bringing together what the law previously presented as disconnected and fragmentary doctrines. This allows the law to dispense with the uninformative or misleading terminology that, being tied to the fragments and not to the

10 McKendrick, n 5 above, 664–5, points to the main developments in England (the defence of change of position, restitution of an ultra vires tax and restitution for mistake of law) that were part of, or followed shortly after, the recognition of unjust enrichment by the House of Lords in Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548. 11 Birks, n 7 above, 19–22; P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn, 2005) 40 (‘the sine qua non of rational development is the capacity to grasp the unity of unjust enrichment’). 12 In Unjust Enrichment, ibid, 39, Birks added a controversial additional element, whether the plaintiff’s right was in personam or in rem. 13 Birks, n 7 above, 19. 14 Ibid, 20.

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more inclusive generic conception of unjust enrichment, had formerly obscured analysis. Accordingly, on this understanding of Birks’s comments, the cases to which the injustice of the enrichment looks down are not a miscellany of doctrinal fragments, but the sites of a generic conception that unites them by drawing attention to their common structure. The apprehension that liability for unjust enrichment may enshrine every judge’s personal sense of justice is misguided, because the determination of whether an enrichment is unjust involves recourse not to social and political values at large, but to the normative considerations appropriate to this common structure. A court that finds the defendant liable on this basis where the situation does not plausibly evince this structure (or that fails to find the defendant liable when it does) is making a mistake in legal terms. By indicating the elements constitutive of liability, the generic conception frames and disciplines discourse about unjust enrichment. However, for these elements to function as a principle, that is, as a formula for coherently organising the relevant normative considerations, they must form not merely a list but a conceptually unified whole. Are the elements that make up the generic conception—the defendant’s enrichment, the enrichment’s being at the expense of the plaintiff, the enrichment’s being unjust, and the absence of defences—conceptually disconnected from one another, or are they internally related so that together they form an integrated ensemble? Liability for unjust enrichment presupposes that the generic conception brings together various instances of restitutionary liability that common law had historically assigned to separate compartments. But this drive for unity across different kinds of transactions (which has been the prime impetus for the development of the generic conception of unjust enrichment) would be pointless unless the conception provided unity within each transaction. For if the elements of liability are merely a pot-pourri of mutually inconsistent or indifferent considerations, then they cannot constitute a ‘shared and stable pattern of reasoning’.15 Each element would represent a consideration with its own normative significance, so that liability would depend on the particular way in which the various considerations are balanced and combined in any given case or group of cases. The generic conception of unjust enrichment would then provide merely a common label, not a common pattern of reasoning. Only by combining in a coherent set could the elements of the generic conception impart the unity of an overarching principle to the various situations that contemporary scholars of restitution claim fall under it. Moreover, only when they are coherently unified do the individual elements themselves have a stable meaning. What counts as an ‘enrich15

Ibid, 19.

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ment’ of the defendant cannot be determined independently of what renders the enrichment ‘unjust’ and ‘at the expense of the plaintiff’. The idea of an enrichment presupposes a normatively relevant baseline against which the enrichment is measured, and what is normatively relevant has to refer to something to which the appropriate considerations of unjustness can intelligibly apply, and vice versa. The same is true of what it means for the enrichment to be realised ‘at the expense of’ the plaintiff. As with other bases of liability, the meaning of each element conditions, and is conditioned by, the meaning of all the others.16 Thus, each element of the generic conception is intelligible not on its own but through its place in the conception as a unified whole. The theoretical idea that reflects this concern with the inner unity of the principle of unjust enrichment, as well as of other principles of private law, is corrective justice.17 Accordingly, the ultimate goal of this essay is to show how corrective justice underlies unjust enrichment no less than it does the other major branches of civil liability.18 The achievement of this goal will follow, I hope, from a presentation of the normative structure of unjust enrichment, that is, from a consideration of the constituent elements of unjust enrichment and of the relationship among them. 16 Compare the observations about negligence by Brennan J in Council of the Shire of Sutherland v Heyman (1985) 157 CLR 424, 487 (HCA):

[A] postulated duty of care must be stated with reference to the kind of damage that the plaintiff has suffered and in reference to the plaintiff or the class of which the plaintiff is a member . . . His duty of care is a thing written on the wind unless damage is caused by the breach of that duty; there is no actionable negligence unless duty, breach and consequential damage coincide . . .; for the purpose of determining liability in a given case, each element can be defined only in terms of the others. 17 E Weinrib, The Idea of Private Law (Cambridge, MA, Harvard University Press, 1995); E Weinrib, ‘Corrective Justice in a Nutshell’ (2002) 52 University of Toronto Law Journal 349. 18 On tort law, see E. Weinrib (ed), Tort Law (Aldershot, Ashgate, 2002). On contract law, see P Benson, ‘The Unity of Contract Law’ in P Benson (ed), The Theory of Contract Law: New Essays (Cambridge, Cambridge University Press, 2001) 118; J Gordley, ‘Contract Law in the Aristotelian Tradition’, ibid, 206; E Weinrib, ‘Punishment and Disgorgement as Contract Remedies’ (2003) 78 Chicago-Kent Law Review 55. The relationship between corrective justice and unjust enrichment has received considerable attention recently, especially since the publication of The Idea of Private Law, ibid, which argued for the centrality of corrective justice not only for tort law (where controversy about its role had been raging for years) but for the entire range of private law. See K Barker, ‘Unjust Enrichment: Containing the Beast’ (1995) 15 Oxford Journal of Legal Studies 457; K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in J Neyers, M McInnes, S Pitel (eds), Understanding Unjust Enrichment (Oxford, Hart Publishing, 2004) 79; D Klimchuk, ‘Unjust Enrichment and Corrective Justice’, ibid, 111; A Drassinower, ‘Unrequested Benefits in the Law of Unjust Enrichment’ (1998) 48 University of Toronto Law Journal 459; N McBride and P McGrath, ‘The Nature of Restitution, (1995) 15 Oxford Journal of Legal Studies 33; M McInnes, ‘The Law of Unjust Enrichment: A Reply to Professor Weinrib’ [2001] Restitution Law Review 29; M McInnes, ‘The Measure of Restitution’ (2002) 52 University of Toronto Law Journal 164, 186–196; L Smith, ‘Restitution: The Heart of Corrective Justice’ (2001) 79 Texas Law Review 2083; S Smith, ‘The Structure of Unjust Enrichment Law: Is Restitution a Right or a Remedy?’ (2003) 36 Loyola of Los Angeles Law Review 1037; S Smith, ‘Justifying the Law of Unjust Enrichment’ (2001) 79 Texas Law Review 2177.

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The law of gifts provides an indication of what the structure of unjust enrichment looks like. Because they both deal with gratuitous transfers, gift and unjust enrichment are closely related—so much so that ‘non-gifts’ have been strikingly identified as the concern of the law of unjust enrichment.19 The point of drawing attention to the relationship between unjust enrichment and gifts is not to claim that unjust enrichment is simply a defective gift; if this were the case unjust enrichment would not be a distinct and independent ground of liability. The difference between gift and unjust enrichment is obvious: in gift, the gratuitous transfer creates in the transferee a right, good against the whole world, to something that was previously the transferor’s; in unjust enrichment, the transferee acquires not a right in what was transferred but an obligation to return it to the transferor. Gift and unjust enrichment are thus converse concepts, with the former focusing on the right and the latter on the duty that can flow from a gratuitous transfer. Consequently, despite the difference in the content of these concepts, they share, at least at a very general level, a normative structure appropriate to the juridical treatment of gratuitous transfer. And because gift is a more mature concept than unjust enrichment, the structure of gift points to the sort of markers that we seek in elucidating the structure of unjust enrichment. A gift has three structural components. First, the subject matter of a gift is something to which, at the inception of the transaction, the transferor has a right: nemo dat quod non habet. Secondly, an act of delivery (the factum donandi) transfers possession of the subject matter of the gift from the transferor to the transferee. Thirdly, this transfer must be accompanied by the donor’s intent to make this gift (the animus donandi) and by the donee’s acceptance of the gift, which together constitute the norm-creating conditions that allow the act of delivery to be construed as a voluntary transfer of right from donor to donee. These three components coalesce in a bipolar normative structure that situates the parties correlatively as the self-determining transferor and transferee of a right. In this way the legal notion of gift can readily be understood as exemplifying corrective justice. The same three structural components underlie unjust enrichment. Unjust enrichment is the basis of liability for dealing with what has been called ‘a defective transfer of value’.20 Within its brief compass, this phrase combines reference to a subject matter that is initially the transferor’s (‘value’), an act of transfer and a set of norm-creating conditions (‘defective’) that places the transferee under an obligation to restore what was transferred. If these structural components can be fleshed out in a way that exhibits the bipolarity of the parties’ interaction as self-determining persons, then the principle of unjust enrichment, no less than the legal Drassinower, n 18 above, 478. Restatement of the Law of Restitution and Unjust Enrichment (3rd), discussion draft (Philadelphia, PA, American Law Institute, 2000) s 1. 19 20

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notion of gift, will also be intelligible as an actualisation of corrective justice. The sections that follow go through these structural components in turn.

II

T HE JURI D I CAL S I G N I F I CAN CE O F VAL UE

Value involves the treatment of qualitatively heterogeneous things as quantitatively comparable and equivalent. Anything useful has both a qualitative and a quantitative aspect. The qualitative aspect, the use that a person makes or might want to make of the thing, focuses on the particular qualities of the thing in question and on the role of those qualities in satisfying the particular wants and needs of the person using the thing. Thus the qualitative aspect connects the particularity of the thing to the particularity of the person using it. In contrast, the quantitative aspect abstracts from the specific usefulness of the thing to a general conception of usefulness in which things are quantitatively comparable with other things. This quantitative aspect is value. A judgement of value takes the form that such-and-such a quantity of one thing is equivalent to such-and-such a quantity of another thing. Value thereby relates different persons through the exchange of different things. Because value exists only in and through exchange with another, it is intrinsically relational.21 The existence of value presupposes someone’s having a right to the thing, whether labour or property, that has value. To take part in an exchange in which one gives and receives something of value, one must have a right to what one gives and be capable of acquiring a right to what one receives. Thus, from the juridical perspective, value is an incident of one’s rights. Having a right gives the right-holder an entitlement to realise that value through exchange and to receive that value as the quantitative equivalent of the right’s infringement. In Hegel’s words: ‘As the full owner of the thing, I am owner both of its value and of its use.’22 However, when dealing with transfers, one must distinguish between things that have value and value itself. The transfer to another of a thing that has value does not necessarily mean that there has also been a transfer of value. Take the example of exchange. When I exchange a certain 21 This brief description of value is based on G Hegel, Elements of the Philosophy of Right, ed A Wood (Cambridge, Cambridge University Press, 1991) s 63, which of course stands in a long tradition that begins with Aristotle’s treatment of reciprocity in Nicomachean Ethics V, 5, and continues through Marx’s classic discussion at the beginning of Capital. The phrase ‘intrinsically relational’ comes from Benson, n 18 above, 192. Throughout I am deeply indebted to Peter Benson’s exposition of the Hegelian treatment of value and exchange in the essay just cited and in his previous work, especially P Benson, ‘Abstract Right and the Possibility of a Nondistributive Conception of Contract: Hegel and Contemporary Contract Theory’ (1989) 10 Cardozo LR 1077, 1187–96. 22 Hegel, ibid (emphasis in original).

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quantity of shoes for a certain quantity of food,23 I no doubt have transferred something of value, the shoes, and received something of value in return, the food. But if the food is of equal value to the shoes, no value has been transferred. Exchange on such terms features the reciprocal transfer of things of value but not the transfer of value itself, since through the transaction the parties maintain the same quantity of value as before. Exchange demonstrates that value ‘is distinct from the external things which change owners in the course of the transaction’,24 because in an exchange external things are transferred but value is not. To be sure, I would not engage in this exchange unless the food I received was more useful or valuable to me than the shoes I surrendered. But the value that is expressed in and through the exchange abstracts from me as a particular person with a particular preference for this amount of food rather than that amount of shoes. What matters to value in exchange is not the value to me in isolation, but the value as determined by the intrinsically relational process of exchange among those trading shoes for food. Only to the extent that the transfer is gratuitous, that is, without involving the receipt of equivalent value, does the transfer of a thing of value involve a transfer of value as well. If I transfer shoes but receive in return nothing or food of less value (like the Homeric hero who foolishly ‘exchanged gold armour for bronze armour, a hundred oxen’s worth for nine’25), then I have transferred not only the shoes as things of value but value itself. In contrast to what happens in an exchange, the transaction does not preserve intact the amount of value that I have, because there is no equivalence of value in what was given and received. Through this gratuitous transfer the value of what is rightfully mine has been diminished and the value of what is rightfully the transferee’s has been increased by the amount of value that has been transferred without reciprocation. In the language of unjust enrichment, the transferee has been enriched at my expense. This does not mean, of course, that the transferee is obligated to return the enrichment. That further consequence depends on whether the retention of that enrichment is unjust, that is, whether the transfer occurred under conditions that generate an obligation to restore the transferred value. Being unreciprocated, the transferred value of the shoes thus has a double aspect. On the one hand, it is a component of the transferee’s proprietary right in the shoes. As is the case with every owner, the transferee who becomes the owner of the shoes also thereby becomes the owner of the value of the shoes. This is an exclusive right that the transferee has against the whole world. As the former owner, I stand in no different 23 24 25

Aristotle, Nicomachean Ethics V, 1133a23. Hegel, n 21 above, s 77. Homer, Iliad VI, 235–6.

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relationship with respect to this right than anyone else. If the transferee sells the shoes—even if the transferee sells the shoes back to me—the transferee is entitled to keep the value realised through the sale. If the shoes are tortiously destroyed or converted—even by me—the transferee is entitled to receive from the wrongdoer their equivalent value as compensation. On the other hand, the value in the shoes is also a component of the normative relationship, unshared by anyone else, between me as transferor and the transferee. Even if the transfer of the shoes (and therefore of their value) is valid from a proprietary standpoint, the gratuitous nature of the value raises a distinct issue of justice between us as parties to the transaction. Because the law assumes that persons generally act to further their own ends rather than others’, it seeks to ensure that I truly intended the transfer to be gratuitous. And, conversely, because the law does not allow obligations to be created behind another’s back, restitution of the transferred value has to be consonant with the free will of the transferee. Thus, aside from the passage of title in the shoes, the question arises whether the circumstances of the gratuitous transfer of the value in the shoes are such that the transferee is under an obligation to restore this value to me. These circumstances pertain to the relationship between the two of us as participants in the transfer of value rather than the relationship between the transferee, as the new owner of the shoes, and everyone else. Put more technically, although I have lost the in rem right to the shoes (and thus to their value), one can still ask whether the conditions of transfer were such that I now nonetheless have, as against the transferee, an in personam right to the return of their value. It is this aspect of the transferred value that engages the principle of unjust enrichment. The idea that the principle of unjust enrichment deals with transfers of value suggests two structural issues to be addressed. The first is what counts as a transfer of value. The second is what conditions of transfer raise in the transferee an obligation to restore the value to the transferor. The following two sections of this essay deal with these issues in turn.

III

T H E T R A N S F E R O F VA L U E

The normative significance of a transfer consists in the legal nexus it establishes between the transferee and the transferor. If the transfer is effective, it shifts to the transferee what formerly had been rightfully the transferor’s. If, on the other hand, the transfer is defective, the subject matter of the transfer—value, in the case of unjust enrichment—has not rightfully moved from the transferor to the transferee, with the result that the latter must return it to the former. The transfer thus singles out from all the inhabitants of the world two particular parties between whom it creates the legal

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relationship that either entitles the transferee to retain what was transferred or imposes on the transferee an obligation to give it back. At the most general level, the idea of a transfer of value is reflected in two of the requirements for liability under the principle of unjust enrichment: that the defendant must be enriched and that the enrichment must be at the expense of the plaintiff. Understood as aspects of a transfer, these two requirements are not mutually independent elements, but the integrated moments of a single bilateral phenomenon. Unjust enrichment deals not with maintaining the wealth of one party or another against an increase or decrease in the value of their respective resources, nor even with a matching increase and decrease in each party’s wealth, but with a relationship between the parties that can ground the liability that one of them may have to the other. The idea of a transfer establishes the requisite relationship by pointing to an enrichment that has moved from the plaintiff to the defendant. Accordingly, the ‘enrichment’ and ‘expense’ mentioned in the principle of unjust enrichment are terms of mutual relation, each requiring the other in order to function as constituents of liability. They refer not to gains and losses simpliciter, that is, to one person being better off and another person being worse off than before, but to the connection of each to the other through the giving and receiving of value. The notion of a transfer has a distinct set of juridical contours. A transfer involves the movement of a right directly from the transferor to the transferee. Thus, the subject matter of the transfer is something to which the transferor has a right at the inception of the transaction and to which the transferee has a right at its conclusion. This metamorphosis in the holding of the right takes place in and through the transaction, so that the movement of the right from transferor to transferee forms an integrated sequence that directly links the parties. The differing locations of the right, first in one party and then in the other, mark the termini of the transaction, which are linked through the continuity of the right’s movement between them. The elaboration of the principle of unjust enrichment involves recourse to all these characteristics of transfer. To begin with, the enrichment refers to something of value, either labour or property, that was within the right of the plaintiff prior to the value’s transfer. Otherwise the plaintiff would have no standing to have the value returned. For example, no liability in unjust enrichment arises from the setting up of a competing business that drains customers away from one that was previously established. If both businesses draw on the same pool of patrons, the older business is now worse off through the diversion of its previous customers to the new one. Speaking loosely, one may even be tempted to say that the new business realised a gain at the expense of the older one. But no one thinks that this situation falls under the principle of unjust enrichment. The reason is that

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the old business had no exclusive right to the patronage of its former customers. It therefore cannot claim the restoration of what, from the juridical standpoint, it never had. Similarly, at the other end of the transaction, the value has to be brought home to the defendant by being incorporated into the totality of what the defendant is and has as a matter of right. This can involve an enlargement of that totality, a sparing of an expense that would diminish it or the receipt of a service. Value can thus be transferred in a variety of ways, depending on the nature of the enrichment. One way is through the performance of a service (for instance, the nephew who runs errands for his aged aunt26), which constitutes a transfer of value to the person at whose request or for whose benefit the service was performed.27 Another way is through the extinction or easing of another’s obligation, as where the plaintiff discharges the defendant’s debt and thereby spares the defendant the expense of doing so out of his or her own means. Yet another way is the enlargement of the defendant’s entitlements through the acquisition of a proprietary right. If the enrichment consists in the value of some asset (for example, if one mistakenly puts aluminium siding on the wrong house), one can transfer that value only by transferring the right in the asset that has the value. Conversely, the plaintiff who has retained title in the asset (or in its traceable proceeds) has also thereby retained the asset’s value. In such circumstances no value has been transferred, even though the defendant may be benefiting from having what belongs to another. The plaintiff then may well have a claim for the violation of a proprietary right, but not a claim in unjust enrichment.28 Not every benefit realised from the action of another involves a movement of value. For value to move, the enriching action must be directed toward something that is the defendant’s. If the purpose and Deglman v Guarantey Trust and Constantineau [1954] SCR 725 (SCC). Some commentators have suggested that the idea of enrichment does not include pure services that yield no end-product or marketable residuum: J Beatson, ‘Benefit Reliance and the Structure of Unjust Enrichment’ [1987] Current Legal Problems 71; R Grantham and C Rickett, Enrichment and Restitution in New Zealand (Oxford, Hart Publishing, 2000) 60–3. This seems unduly restrictive. What matters is that value has been transferred from the plaintiff to the defendant, not that it continues to exist in some form that makes it capable of being further transferred from the defendant to someone else. 28 Foskett v McKeown [2001] 1 AC 102, 129 (HL). The matter has been fiercely disputed by leading restitution scholars; see P Birks, ‘Property, Unjust Enrichment and Tracing’ (2001) 54 Current Legal Problems 231; A Burrows, ‘Proprietary Restitution: Unmasking Unjust Enrichment’ (2001) 117 LQR 417; R Grantham and C Rickett, ‘On the Subsidiarity of Unjust Enrichment’ (2001) 117 LQR 273, 282–4. The issue is not whether one calls property-based restitution ‘unjust enrichment’, but whether its normative structure and grounding makes it into a different kind of liability—whatever one calls it—than the situations that fall under the normative structure being presented in this paper. As always, the crux is not about words (to what do we attach the term ‘unjust enrichment’—or ‘tort’ or ‘contract’, for that matter?) but about the internal coherence of certain sets of legal ideas whatever one calls them. See Weinrib, The Idea of Private Law, n 17 above, 31. 26 27

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intended effect of the action refer only to the plaintiff and the plaintiff’s property, the value remains with the plaintiff even though the defendant has been advantaged as a result. The absence of liability for incidental benefits illustrates this. In a typical case of incidental benefit, the plaintiff acts with reference to what is his or her own property or in the exercise of his or her own rights, but in the process happens to confer a benefit on a neighbour. Classic examples are the cutting down of a wood that obscures a neighbour’s prospect, or building a wall that happens to shield a neighbour’s house from windstorms.29 Because the work was done not on the defendant’s property but on the plaintiff’s property and for the plaintiff’s own purposes, nothing has occurred that can be construed as a transfer of value from the plaintiff to the defendant.30 One can phrase this conclusion in the terms of the principle of unjust enrichment by saying that the defendant’s enrichment has not come at the plaintiff’s expense.31 What this means is that, by virtue of the labour’s having been expended on the plaintiff’s property and for the plaintiff’s purposes, the value of the labour has been retained by the plaintiff and has not passed to the defendant.32 Understood in terms of a transfer of value, the principle of unjust enrichment involves a direct movement in which the benefit to the transferee’s entitlements is realised through the corresponding diminution of the transferor’s. Three implications follow from the directness of this movement of value. First, what matters is the movement itself from one party to the other, not the role or initiative of either party in bringing about that movement. This reflects the truism that unjust enrichment is concerned not with the wrongfulness of anyone’s action but with value that has been transferred under conditions that require its restitution. For example, the movement of value can take place through the plaintiff’s discharge of an obligation that the defendant owes to a third party,33 or through a third party’s discharge of an obligation owed to the plaintiff by a payment of money to the defendant.34 In such situations value moves from one party to the other even though the defendant in the first case or the plaintiff in the second did nothing to create the nexus between them. Ruabon Steamship Co v London Assurance [1900] AC 6, 12 (HL). D Friedmann, ‘Unjust Enrichment, Pursuance of Self-Interest, and the Limits of Free Riding’ (2003) 36 Loyola of Los Angeles Law Review 831, 845 (‘recovery is denied simply because the nature of the benefit consists of an increase in value without a transfer of property or labor’). 31 Edinburgh and District Tramways v Courtenay 1909 SC 99, 106 (Ct of Session, First Div). 32 Ibid (per Lord President Murray): ‘When a person does something on somebody else’s property, in the mistaken idea, it may be, that it is his own, then the jactura is obvious enough. He has expended money, or something else, which has passed into other persons’ property. But here nothing has passed.’ 33 Brooks Wharf & Bull Wharf v Goodman Bros [1937] 1 KB 534 (CA). 34 L Smith, n 18 above, 2156. 29 30

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Secondly, embedded in the principle is a conception of direct enrichment, sometimes termed ‘privity’.35 It is this direct movement of value transferred from the plaintiff to the defendant that liability reverses by requiring the defendant to move the value back to the plaintiff. In view of the point made in the previous paragraph, the requirement of direct enrichment does not mean that the value has to be given by the active hand of the plaintiff into the hand of the defendant. Directness in this context is juridical, not physical: the benefit to what is within the defendant’s entitlement takes place through the detriment of what is within the plaintiff’s. Thus, as just mentioned, a payment by the plaintiff that extinguishes a debt owed by the defendant to a third party or a receipt of money that extinguishes a right possessed by the plaintiff against a third party are instances of a transfer of value, because the defendant’s enrichment occurs immediately through the plaintiff’s corresponding deprivation. Accordingly, the connection between enrichment and deprivation is not a causal one satisfied by determining that the former would not have occurred but for the latter36—and so including remotely antecedent stages of the enrichment’s transmission—but a transactional one in which the transfer of value immediately constitutes the parties as transferor and transferee. Thirdly, the existence of a transfer of value from the plaintiff to the defendant is not affected by the fact that the plaintiff has recouped the transferred value from others. Because such passing on of the plaintiff’s loss is external to the parties’ relationship as transferor and transferee, it cannot negate the occurrence of that transfer. To be sure, the defendant is not liable unless the enrichment has been ‘at the plaintiff’s expense’. However, within the principle of unjust enrichment, the plaintiff’s expense and the defendant’s enrichment are terms of mutual relation; neither hangs in the air as if detached from the other. The point of requiring the enrichment to be ‘at the plaintiff’s expense’ is not to refer to a baseline for deprivation set one-sidedly by the plaintiff’s overall level of wealth prior to the interaction with the defendant,37 but rather to serve the relational function of identifying the plaintiff as the party who transferred the value that is now being claimed back from the defendant.38 35 The issue is a matter of controversy; see A Burrows, The Law of Restitution (London, Butterworths, 1993) 45–54; G Virgo, The Principles of the Law of Restitution (Oxford, Oxford University Press, 2nd edn, 2006) 105–12; Birks, n 11 above, 86–98; Smith, n 18 above, 2155–75. 36 This is P Birks’s formulation in ‘“At the expense of the claimant”: Direct and Indirect Enrichment in English Law’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 518. 37 For a different view, see R Grantham and C Rickett, ‘Disgorgement for Unjust Enrichment,’ (2003) 62 CLJ 159, 166–170 (arguing that unjust enrichment is inherently limited to restoration of the plaintiff’s wealth position to the status quo ante). 38 Kleinwort Benson v Birmingham City Council [1996] 4 All E R 773 (CA).

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A final observation about the transfer of value concerns the notion of ‘subjective devaluation’.39 This term suggests that a benefit may not qualify as an enrichment if a defendant can plausibly assert that, despite the benefit’s objective value, he or she subjectively attaches no value to it. Once enrichment is understood as signalling a transfer of value, however, subjective devaluation cannot go to determining whether there has been an enrichment. In allowing qualitatively different things to be presented as quantitatively comparable, value abstracts from the particular use that a person might subjectively want to make of a thing given its particular qualities. Only because of its indifference to the subjectivity of the participants in the transfer can value be seen as intrinsically relational, that is, as defining the relationship between the two parties rather than as reflecting the specific wants of either one of them considered in isolation. If value is the subject matter of the principle of unjust enrichment, the value transferred has to have the same quantitative significance for both transferor and transferee. Accordingly, to see the possibility of subjectively devaluing the benefit as determining whether the benefit counts as an enrichment is inconsistent with the notion that unjust enrichment deals with transfers of value. At bottom, what subjective devaluation is about is not the nature of the enrichment, but the transferee’s freedom to make one’s own choices.40 This is, of course, an important consideration, for liability in unjust enrichment has to be consistent with the freedom of the interacting parties. But the importance of the parties’ freedom lies not in establishing whether a transfer took place, but in determining whether that transfer is subject to conditions that create an obligation to make restitution. In other words, the freedom of choice that is vindicated through the notion of the defendant’s subjective devaluation pertains not to whether there was an enrichment but to whether the enrichment was unjust. It is to that issue that I now turn.

IV

T H E O B L I G AT I O N - C R E AT I N G CO N D I T I O N S

As between the parties, a transfer is just if it is consonant with the free will of both of them or if it fulfils an obligation that one of them has to the other. The function of private law with respect to transfers is to actualise this notion of justice in transfer by constructing legal categories that reflect it. An obvious example is the law of gifts, which, through the categories of the donor’s donative intent and the donee’s acceptance, requires that both parties voluntarily participate in the transfer. Birks, n 7 above, 109. M McInnes, ‘Enrichment Revisited’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (Oxford, Hart Publishing, 2004) 175. 39 40

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Like the law of gifts, the principle of unjust enrichment deals with the justness of gratuitous transfer. As noted in the first section of this essay, the difference between them is this: whereas gift deals with whether the transferor has passed the right in a particular object to the transferee, the principle of unjust deals with whether the transferee is under an obligation to restore the gratuitously transferred value to the transferor. This difference, however, does not affect the underlying requirement that the normative consequence of the transfer—whether the law creates in the transferee a right (as with gift) or an obligation (as with unjust enrichment)—has to be consonant with the free will of both parties. As Bowen LJ famously observed in drawing the parallel between gift and restitutionary liability: ‘Liabilities are not to be forced upon people behind their backs any more that you can confer a benefit upon a man against his will.’41 Underlying the obligation-creating conditions is the idea that the parties each have an entitlement to what is one’s own until one freely parts with it.42 As the owner of the value at the inception of the transfer, the plaintiff makes a claim that rests initially on not having freely parted with that value. However, the normative ground of this claim has equal validity for both parties. Accordingly, the plaintiff’s entitlement to what is one’s own until freely parted with has to coexist with the similar entitlement of the defendant. The plaintiff’s claim not to have freely parted with the transferred value cannot create an obligation that usurps a pre-existing entitlement of the defendant’s with which the defendant also has not freely parted. Consequently, the principle of unjust enrichment postulates an ensemble of obligation-creating conditions that relate the defectiveness of the gratuitous transfer to the free will of both the transferor and the transferee. These conditions thereby construct the liability to make restitution as a relationship of free will to free will between the parties to the transfer of value. The condition applicable to the plaintiff is that the transfer of value was not intended by the plaintiff as a gift to, or did not fulfil the plaintiff’s legal obligation toward, the defendant. This condition simply restates with respect to gratuitous transfers the notion that justice in transfer requires that the transferor act either voluntarily or pursuant to an obligation. Value given by the plaintiff as a gift to the defendant43 or in fulfilment of an obligation accords with justice in transfer. It is, therefore, beyond recall by the principle of unjust enrichment. Thus, whether a legal system formulates the ground for unjustness under the principle of unjust enrichment Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 (CA). Drassinower, n 18 above, 477. Strictly speaking, one should add ‘in circumstances where the transferee’s acceptance can be presumed’. This is rarely an issue. 41 42 43

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positively in terms of a list of unjust factors44 or negatively in terms of absence of juristic reason45 or absence of basis,46 the grounds applicable to the plaintiff are ultimately always negative, consisting in the transfer’s failure to conform to either of the two modes for achieving justice in transfer. In this context, the notion of donative intent is an extended one. It goes beyond subjective intent to include situations in which, whatever the transferor’s subjective intent, the background legal categories justify the imputation of an intention to bestow a gift. In this extended sense, donative intent draws on the public meaning that the plaintiff’s action has in the relationship between the parties. Imagine, for example, that the plaintiff makes an unrequested improvement to property that he knows belongs to another in the hope of being compensated for his labour. Subjectively, he may have no intention of giving a gift. But because his action takes place within a legal regime under which, as he knows or ought to know, only the owner has the right to determine whether to improve one’s property, the improver can be taken to know that his action cannot obligate the owner to pay for the improvement. Accordingly, the law treats his action as the bestowal of a gift. The background legal category of property, which recognises in the owner the exclusive power to improve the condition of what is owned, justifies the law’s viewing the improvement as the expression of a donative intent. In this example the imputation of donative intent is based not on what is subjectively within the plaintiff’s mind, but on how the plaintiff’s conduct is to be publicly understood and categorised in relation to the defendant’s property. Accordingly, one can conclude that, having transferred the value free of any obligation on the transferee, the improver is a risk-taker with respect to the hoped-for compensation.47 Conversely, however, if the improver mistakenly thinks that the property is his own or that he is improving it at the owner’s request, donative intent can no longer be imputed to him. Because the improver is unaware that his improvement was not authorised, he cannot be held to what is implied by the knowledge that the power to improve property is exclusively the owner’s. For the improver who acts out of mistake or ignorance, an obligation-creating condition is in place. The presence of an obligation-creating condition on the plaintiff’s side (as in the example of a mistaken improvement) does not in itself mean that the defendant is liable. Such a condition is necessary for liability but not sufficient. It is necessary because without it the passage of value accords 44 This is the traditional English approach; see A Burrows, Understanding the Law of Obligations: Essays on Contract, Tort and Restitution (Oxford, Hart Publishing, 1998) 62. 45 The Canadian formulation since Pettkus v Becker [1980] 2 SCR 834 (SCC). 46 The revised view of Peter Birks; see Unjust Enrichment n 11 above. 47 Birks, n 7 above, 101–3.

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with justice in transfer and, therefore, cannot be considered an unjust enrichment. But because the obligation-creating conditions have a relational function, the defendant is held liable only if this condition is matched on the defendant’s side. When a gratuitous enrichment has been made without donative intent, the question arises whether requiring the recipient to restore the enrichment is consonant with the recipient’s freedom of choice. Put at its broadest, the obligation-creating condition on the defendant’s side is that the defendant accepted the benefit as non-gratuitously given. As with the plaintiff-oriented condition, this condition refers to the absence of donative intent in the transfer of value. It imbues this absence of donative intent on the plaintiff’s part with a relational significance by connecting it to an imputed expression of the defendant’s free will. The non-gratuitousness of the transfer—the consideration at the heart of unjust enrichment—thereby embraces and normatively links the parties. If the defendant can be regarded as having accepted a benefit as non-gratuitously given, then in fairness the benefit cannot be retained gratis. Nor can the defendant be compelled to give something in exchange for that benefit as if there were a contract between the parties, since the benefit was not given as part of an enforceable exchange. All that the defendant can do is return the value, so as to avoid keeping as a gift what was neither given nor accepted as a gift. Acceptance is thus a relational notion. It refers to what is to be imputed to the defendant in the light of the significance for the defendant of what the plaintiff has non-gratuitously transferred. Although it is defendantoriented, it does not treat the defendant in isolation from what the plaintiff did. It is not one ‘unjust factor’ in a list of unjust factors. Nor does it point to a moral failure consisting in the defendant’s unconscientious receipt of something for which he or she wants to avoid payment.48 Rather, as a member of the conceptual sequence that unites the transferor and transferee of value within an obligation-creating relationship, it is a structural feature of liability for unjust enrichment. Within that relationship the defendant’s acceptance of the benefit as non-gratuitously given and the plaintiff’s lack of donative intent are correlatives. As with donative intent, the idea of acceptance draws on the public meaning of the parties’ interaction. What matters is not the defendant’s inner psychological state, but the judgments and assumptions about the parties’ interaction that can reasonably be made against the background of the legal structure in which they operate.49 In particular, the defendant 48 For ‘free acceptance’ as an unjust factor or as a signal of unconscientious receipt, see Birks, n 4 above, 114, 266; P Birks, ‘In Defence of Free Acceptance’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Clarendon Press, 1991) 105. 49 Compare Deane J’s reference to ‘a benefit actually or constructively accepted’ in Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221, 257 (HCA).

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who becomes aware of the receipt of something for nothing has no reason to assume that the benefit was given gratuitously. Private law is a legal regime through which parties pursue their self-chosen ends in accordance with their conceptions of their own interests. The law does not presume— and therefore those subject to the law are not entitled to presume—that someone has chosen to transfer value gratuitously, thereby surrendering the means for pursuing one’s own ends. To be sure, a person may on occasion identify another’s interest with one’s own and therefore confer gratuitous benefits on the other. However, such donative intent must be established for each particular case, not assumed to be the general rule. Accordingly, a defendant who is aware that another is bestowing an apparently gratuitous benefit and does not intervene to prevent it takes the risk that donative intent is absent. By allowing the enrichment to occur, the defendant is expressing her free will with respect to it. If it turns out that the plaintiff indeed had no donative intent (for example, if the plaintiff was improving the defendant’s land on the mistaken impression that it was his own), then the defendant’s failure to prevent the benefit can be considered an acceptance of that benefit as non-gratuitously given. The limiting case for the imputation of acceptance emerges from Pollock CB’s graphic statement: One cleans another’s shoes; what can the other do but put them on? . . . The benefit of the service could not be rejected without refusing the property itself.50

In this famous example, the benefit has been so completely entangled in the recipient’s property that the latter has had no opportunity to treat the cleaning of the shoes as an object of choice independent of his use of them. Acceptance of the benefit can therefore not be inferred from its non-rejection. In this context, entanglement means not merely that the transferred value has been absorbed into the totality of the defendant’s entitlements—this happens to all unjust enrichments—but that within that totality it cannot be separated from the other components, as here the cleanness of the shoes cannot be separated from the shoes themselves. The relevance of entanglement suggests that there are two kinds of situation in which one can impute an acceptance of the benefit as non-gratuitously given. The first is when the benefit is not, or not yet, entangled in what the defendant is otherwise entitled to. The second is when, whether the benefit is entangled or not, the nature of the defendant’s activities and projects are such that the benefit can nonetheless be regarded as accepted. In the first kind of situation the defendant knows or takes the risk that the benefit is non-gratuitously given and yet requests it or foregoes the opportunity to refuse it. Some of the best-known cases in the law of restitution illustrate this: the plaintiff performs a service for the defendant 50

Taylor v Laird (1856) 25 LJ Ex 329, 332 (Exchequer).

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under an unenforceable contract, which serves as evidence both of the defendant’s request for the service and of the plaintiff’s non-donative intent in providing it51; or the defendant has been enriched by the plaintiff’s labour in a quasi-spousal relationship although he knew or ought to have known that the benefit was given to him not as a personal gift but as a reflection of the full integration of their economic well-being52; or the owner ‘lies by’ when he knows that another is expending money to improve the property on the mistaken supposition of his own title.53 The same holds if after receipt the defendant refuses to restore a nongratuitously given benefit that is easily returnable because it is not inextricably entangled into the defendant’s entitlements.54 In such cases, the defendant’s action or inaction in the face of the non-gratuitous conferral can be equated to an acceptance of those benefits as given without donative intent.55 In the second kind of situation for imputing acceptance, the law treats the defendant as having accepted the benefit because, given the nature of the defendant’s activities and projects, the defendant has no reason not to accept it. For example, the defendant holds property destined for a particular use or disposition that is forwarded by the benefit that the plaintiff non-gratuitously conferred56; or the plaintiff discharges an

51 Deglman v Guarantey Trust Co and Constantineau [1954] SCR 725 (SCC); Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221 (HCA). 52 Pettkus v Becker [1980] 2 SCR 834, 849 (per Dickson J):

[W]here one person in a relationship tantamount to spousal prejudices herself in the reasonable expectation of receiving an interest in property and the other person in the relationship freely accepts benefits conferred by the first person in circumstances where he knows or ought to know of that reasonable expectation, it would be unjust to allow the recipient of the benefit to retain it.’ 53 Ramsden v Dyson (1866) LR 1 HL 129 (HL). 54 McDonald v Coys of Kensington [2004] 1 WLR 2775 (CA). At paras 37–8, Mance LJ describes the defendant’s action in keeping the personalised mark as a choice and as the exercise of a deliberate preference. 55 It is sometimes thought that this notion of acceptance through inaction is in tension with the absence of tort liability for omissions; see G Mead, ‘Free Acceptance: Some Further Considerations’ (1989) 105 LQR 460, 463–4; A Simister, ‘Unjust Free Acceptance’ [1997] Lloyd’s Maritime and Commercial Law Quarterly 103, 118–20. Properly understood, however, the absence of tort liability is not about inaction as such, but about conferring a benefit to which the recipient has no right; see P Benson, ‘The Basis for Excluding Liability for Economic Loss in Tort Law’ in D Owen (ed), Philosophical Foundations of Tort Law (Oxford, Clarendon Press, 1995) 447–9. In the unjust enrichment context, the imputed acceptance through the defendant’s inaction does not reflect a duty to bestow a gratuitous benefit on the plaintiff, but goes rather to whether the defendant’s non-gratuitously given benefit can be treated as non-gratuitously accepted. Indeed, there is a deep harmony between the absence of liability for nonfeasance and the requirement of acceptance: both actualise the parties’ freedom of choice by expressing the law’s antipathy to gratuitous benefits that are not gratuitously intended. 56 Lac Minerals v International Corona Resources Ltd [1989] 2 SCR 574 (SCC) (defendant developed mine and constructed mill on plaintiff’s mining property); Greenwood v Bennett [1973] 1 QB 195 (CA) (improvements to a car that was to be sold).

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obligation owed by the defendant57; or the director exercises his skill to the advantage of the corporation although in breach of his fiduciary duty.58 In such instances the issue is not whether the defendant as a rational maximiser is better off with the benefit in some global sense, but whether the benefit forwards the specific purposes implicit in the defendant’s antecedent activities. If it does, then requiring restitution of the transferred value is, from the public standpoint of the parties’ relationship, consistent with the defendant’s free will. The defendant’s retention of such a benefit after becoming aware of the lack of donative intent with which it was conferred constitutes an acceptance of it as non-gratuitously given. Because money has exchange value but not use value, mistaken payments—sometimes regarded as the core case of unjust enrichment59—fall under both kinds of situations. Until it is spent, money is not entangled in the defendant’s other entitlements. If it has been spent to purchase something separate from the defendant’s other entitlements, the value remains disentangled; restitution can be made of the present value of what was purchased.60 And having no use value, money forwards any and every specific purpose that the defendant might have.61 On both counts, therefore, the recipient’s acceptance can be imputed for money conferred non-gratuitously. Under the heading ‘incontrovertible benefit’, the second kind of situation is conventionally treated as establishing the enrichment rather than the unjustness of retaining it. In this respect, incontrovertible benefit is the counterpart of subjective devaluation. But, as with subjective devaluation, the considerations for postulating an incontrovertible benefit pertain not to whether a transfer of value has taken place but to whether the defendant’s retention of the transferred value is consonant with the parties’ free will. The point of invoking incontrovertible benefit is to show that imposing an obligation to make restitution would not violate the defendant’s freedom of choice: ‘The principle of incontrovertible benefit . . . exists when freedom of choice as a problem is absent.’62 If this is the case, it should be situated where it structurally belongs: as an obligationcreating condition pertaining to value transferred without donative intent. The same can be said about the defence of change of position when the defendant has spent the enrichment. This, too, is now conventionally explained in terms of enrichment, that the defendant has been Brooks Wharf & Bull Wharf v Goodman Bros [1937] 1 KB 534 (CA). Phipps v Boardman [1967] 2 AC 46 (HL). 59 Birks, n 7 above, 3. 60 This is Lord Templeman’s example of the purchased automobile in Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 560 (HL). 61 B P Exploration Co (Libya) v Hunt (No 2) [1979] 1 WLR 783, 799. 62 Regional Municipality of Peel v Her Majesty the Queen in the Right of Canada (1992) 98 DLR (4th) 140 (SCC), quoting J Gautreau, ‘When Are Enrichments Unjust?’ (1988–89) 10 Advocates’ Quarterly 258, 271. 57 58

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‘disenriched’.63 The explanation is not without difficulty. The consumption of the value is the exchange of the transferred value for some good to which the consumer attaches a still greater value. At the general level, one may ask why such consumption negates the legal effect of the original transfer. Nor is the idea of disenrichment unambiguous. If I have spent the mistaken payment on a trip around the world,64 I am still enriched by what I did with the money—I now have the recollection of adventure and discovery, the slides and photographs, the seemingly inexhaustible store of conversational material—even though the money is no longer in my bank account. What has occurred is a transformation of the enrichment, not its disappearance. A more particular form of this difficulty is that the defence of change of position sometimes applies even when one can still discern the enrichment among the defendant’s assets. Say that the defendant, having received a mistaken payment from the plaintiff, makes the extraordinary expenditure of throwing out her old shoes and buying a shining new pair. If the defendant had no notice of the mistake at the time of the purchase, the defence of change of position is available even though the defendant seems to remain enriched.65 The argument to this conclusion on enrichment grounds is that, the defendant’s choice to buy new shoes having been vitiated by her mistaken belief about her resources, she can subjectively devalue the shoes.66 This preserves the relevance of the defence to enrichment at the cost of oddly saying that the defendant can subjectively devalue what she decided was worth purchasing. Even in its own terms, this argument, with its reference to the vitiation of the defendant’s choice, is about freedom of choice, not enrichment. The impression that the change of position in this instance is about enrichment is the product of the idea that subjective devaluation is also about enrichment. At bottom, however, subjective devaluation is (as is widely acknowledged) really about freedom of choice. Clarity about the structure of unjust enrichment, I have suggested, requires that issues of freedom of choice be treated as going to the unjustness of retaining the value rather than to the occurrence of the transfer. If so, change of position here negates not the enrichment but an obligation-creating condition. The point can be put this way: the defendant’s acceptance of the mistaken payment as non-gratuitously given presupposes that the defendant is aware of the plaintiff’s absence of donative intent. Notice to 63 Birks, n 11 above, 208. Birks allows that there may turn out to be ‘very rare’ examples of unjust-related change of position (ibid, 261). 64 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 560 (HL). 65 Cf RBC Dominion Securities v Dawson (1994) 111 DLR (4th) 230 (Nfld CA). I have substituted new shoes for new furniture in order to bring the case close to Pollock CB’s famous comment in Taylor v Laird (1856) 25 LJ Ex 329 (Exchequer). 66 P Birks, ‘Overview: Tracing, Claiming and Defences’ in P Birks (ed), Laundering and Tracing (Oxford, Clarendon Press, 1995) 331–2.

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the defendant that the payment was mistakenly made triggers the obligation-creating condition, cutting off the possibility of the defendant’s spending the money in a way that would constitute a change of position. Consequently, as long as the defendant does not know of the mistake, she has no reason to treat the payment as something that is not rightfully hers and can spend it accordingly. If the expenditure goes to something that remains separate from what she is otherwise entitled to, the plaintiff can recover the transferred value (or what remains of it). This is just an instance of the first kind of situation for imputing acceptance. If, however, the expenditure has consumed the value in such a way nothing separately ascribable to it remains, then the enrichment has become entangled with the defendant’s other entitlements. Whether the defendant has spent the money on getting her old shoes cleaned or on replacing the old shoes with a new pair of clean shoes, her situation is no different from that of a person whose shoes are mistakenly cleaned by another. An obligation to restore such an enrichment would not be consistent with the defendant’s freedom of choice. Pollock CB’s observation,67 that the benefit could not be rejected without refusing the property itself, applies. In such a case, notice of the mistake comes too late for acceptance to be imputed to the defendant. Thus, in sum, change of position through expenditure depends not on to whether the defendant remains enriched but on whether the expenditure foreclosed the possibility of imputing to the defendant acceptance of the enrichment as non-gratuitously given.68 Compared with the conventional understanding of unjust enrichment, this description of the structure of unjust enrichment shifts considerations usually associated with enrichment (subjective devaluation, incontrovertible benefit, change of position) to the obligation-creating conditions that make retention of the enrichment unjust. A consequence of the conventional placement is that the overloading of the ‘enrichment’ slot within the principle of unjust enrichment involves the emptying of the ‘unjust’ slot. It is then hardly surprising that the nature of the unjustness becomes a mystery. Once the ‘unjust’ slot has been refilled in the way I have suggested, one can quickly identify the notion of justice to which the Taylor v Laird (1856) 25 LJ Ex 329, 332 (Exchequer). A similar argument may be applicable to other kinds of change of position as well, even those in which disenrichment is uncontroversially present. Take the case of the innocent recipient of a payment that is subsequently stolen from him; G Jones, Goff and Jones: The Law of Restitution (London, Sweet & Maxwell, 7th edn, 2007) 848. In such a situation one cannot argue that the change of position was a transformation rather than a disappearance of the enrichment. Nonetheless, the significance of the loss of the enrichment can be thought of as ‘unjust-related’ on the basis of the fact that repayment would have to come from resources to which the defendant had a pre-existing right. Even if by the time of the theft the recipient knew of the mistake, no ongoing acceptance could be imputed. Because the acceptance would carry with it the obligation to make restitution, the law would not, in the absence of donative intent on the part of the recipient, have grounds to attribute to the recipient a willingness to sacrifice the means of his or her own freedom for the claimant’s sake. 67 68

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principle of unjust enrichment refers. The following, final section offers a brief comment on this crucial issue.

V

CORRECTIVELY UNJUST E NRICHMENT

The normative structure described in this essay treats the principle of unjust enrichment as an embodiment of corrective justice. Corrective justice focuses on the relationship between the plaintiff and the defendant within a regime of liability. Drawing on the fact that the liability of a particular defendant is always a liability to a particular plaintiff, corrective justice seeks to explicate the normative considerations that match the relational structure of liability itself. Three intertwined features of corrective justice manifest themselves in the principle of unjust enrichment. The first feature is that corrective justice regards the parties as correlatively situated. In the principle of unjust enrichment, this correlativity takes the form of the parties’ being the transferor and transferee of value. The obligation-creating conditions that render this transfer unjust are also linked correlatively through the lack of donative intent that qualifies both the transferor’s giving of the benefit and the terms on which the transferee is imputed to have accepted it. Because the correlativity of the parties’ normative positions is embedded in the principle of unjust enrichment, that principle deals with the relationship between the parties and not with the parties independently.69 Consequently, the structural components of unjust enrichment, when taken together, make up an integrated conceptual ensemble that arrays the parties as the active and passive poles of an injustice concerned with the non-donative movement of value from one to the other. Unjust enrichment is thus a unified and coherent principle that (as its proponents insist) can impart unity to the diverse situations in which it has historically evolved. The second feature is that the normative markers of the parties’ correlative situations are the plaintiff’s right and the correlative duty that this right imposes on the defendant. Under the principle of unjust enrichment, the plaintiff’s right consists in the value in one’s labour or property. As is necessary for rights, their transfer has to be in accordance with the parties’ will or pursuant to a legal obligation. Accordingly, when value passes from the plaintiff to the defendant without conforming to a rightful mode of transfer and is accepted by the defendant, then the defendant comes under 69 Accordingly, unjust enrichment should not be understood in terms of considerations that refer one-sidedly to either of the parties, eg economic incentives that operate separately on the parties (as set out in J Beatson and W Bishop, ‘Mistaken Payments in the Law of Restitution’ (1986) 36 University of Toronto Law Journal 189) or ethical ideas about the integrity of the self, whose scope is limited to the self in question (as suggested by Dagan, n 2 above, 44).

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a correlative duty to restore it. The unjustness of the enrichment refers to the conditions that create this duty. The third feature is that the rights and duties of corrective justice presuppose a conception of the person as having the self-determining capacity to act towards one’s chosen purposes. Underlying this conception of the person is the notion that, from a juridical perspective, interaction with another involves the expression rather than the sacrifice of one’s freedom or of the means to one’s freedom. Put in Kantian terms, a person is assumed to act with rightful honour, that is, under the imperative to assert one’s worth as a human being in relation to others and not to allow oneself to be a mere means for others.70 The principle of unjust enrichment reflects this conception of the person with respect to both parties. On the plaintiff’s side, a gratuitous transfer is defective unless it is made in execution of the plaintiff’s intent to give a gift. On the defendant’s side, the recipient of gratuitous benefit cannot assume that it was given with donative intent. Through the obligation-creating conditions, the principle of unjust enrichment incorporates these two implications of personality into a unified conception of what justice between the parties requires. That the principle of unjust enrichment conforms to corrective justice should not surprise. Because it matches the structure of liability, corrective justice is the natural framework for considering what might be unjust about the enrichments that attract liability. Moreover, because it reflects the rationality immanent in the legal relationship between the parties, corrective justice is rooted in private law and in its distinctive normative concerns. It is, therefore, resistant to the amorphous invocation of moral and political values that, so it was feared, the recognition of unjust enrichment as a distinct category of liability would let loose. Finally, because it highlights the nature of coherence in arguments about liability, corrective justice indicates what is required for the elements of unjust enrichment to form a conceptually integrated principle of private law. Throughout this essay my purpose has been to outline structure, not to formulate doctrine. The disclosure of structure requires a high level of abstraction, expressed through very general propositions. Such propositions should be regarded not as a code but as an indication of the relationship between different aspects of liability. Legal doctrine can be complex, but legal structure must be simple if it is to illuminate that doctrine.71 In this respect, as in so many others, Peter Birks’s observations are arresting. Describing the relationship of his own work to the classic text on the law of restitution by Goff and Jones, he wrote that his book 70 I Kant, The Metaphysics of Morals, M Gregor trans (Cambridge, Cambridge University Press, 1996) 392 (6:236). 71 A Kull, ‘Rationalizing Restitution’ (1995) 83 California Law Review 1191, 1226: ‘hard cases will still be hard cases. The primary purpose of explaining restitution exclusively in terms of enrichment is rather to build a more serviceable framework of analysis’.

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was ‘pre-occupied with finding the simplest structure on which the material in Goff and Jones can hang’.72 He continued:73 If it seems oversimplified, that is all to the good, since the movement from simple to complex is more easily understood and controlled than are attempts to reason with materials and problems whose basic structures have never been exposed or even looked at.

Then, in one of his characteristically striking epigrams, he noted that ‘it has to be admitted at once that the battle toward simplification is not itself simple’.74 In conformity with these observations, I have presented here the simplest possible structure for the principle of unjust enrichment, one that merely draws out the normative implications of a transfer of value. As a specification of corrective justice, this structure relates unjust enrichment both to the long history of enquiry into the law’s rationality and to the coherence that must characterise any justified basis of liability.

72 73 74

Birks, n 7 above, 3. Ibid, 4. Ibid.

4 Responsibility for Gain: Unjust Factors or Absence of Legal Ground? Starting Points in Unjust Enrichment Law RES PONS I BI LI TY FOR GAI N

K IT BA R K E R * KI T BARKER

I

I NTRO DUCTION

T

H I S E S S AY E N G A G E S a basic question about responsibility for gains in the common law. The question is basic not in the sense that it is easy, but because it relates to the appropriate starting point for our reasoning about unjust enrichments. It can be expressed in the following way: are the gains we make at the expense of others something we need to justify, or something which we are presumptively entitled to keep? The position defended here is the one which is implicit in the traditional English approach to questions of unjust enrichment, according to which good reasons (‘unjust factors’1) have to be demonstrated before any question mark can be raised over a defendant’s gain, even where that gain corresponds to a loss which has been suffered by another. The contemporary significance of the question posed above lies in its implications for the current debate about whether Anglo-American unjust enrichment law ought to adopt ‘the civilian mode’2 of thinking advocated * Associate Professor, TC Beirne School of Law, The University of Queensland. I am greatly indebted to Jenny Steele and Andrew Halpin for their characteristically helpful and incisive comments on an earlier draft. All defects remain entirely my own. 1 This expression was coined by P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985, revised edn 1989). 2 There is obviously more than one civilian model, but all share the central orientation in reasoning, which forms the focus of this essay. See generally, I Englard, ‘Restitution of Benefits Conferred Without Obligation’ in International Encyclopaedia of Comparative Law, vol X (1991), ch 5.

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by Sonja Meier3 and to which Peter Birks, recanting his former faith in typically courageous Aurelian spirit,4 was ultimately drawn.5 In contrast to the conventional English approach, this model sets out by asking whether a defendant’s gain has a legal ‘basis’, rather than whether a reason can be given as to why it is unjust. Several arguments for shifting to the civilian model have been advanced in recent years, which include its pragmatic unavoidability in the wake of the swaps cases,6 its conceptual elegance7 and its potential capacity to accelerate the law’s development towards desirable substantive outcomes.8 With the notable exception of Peter Watts,9 however, few commentators to date have paused to consider whether a change of this type would set the right moral starting point for our decisions about responsibility for gain in the modern day. Indeed, it has not even really been considered whether core questions about responsibility ought to flavour our analytical approach to unjust enrichment law. My view is that they should, because our legal doctrine is always most accessible, meaningful and coherent when it is aligned with its underlying moral premises. Normative arguments are the lifeblood of the law and should be expressed in the form of our legal reasoning, wherever this is feasible. Furthermore, on this occasion, close scrutiny of basic moral starting points tends to support the common law approach. This is not to imply, I must stress, that civilian systems should abandon their heredity. Their systemic investments are undoubtedly too great to be reversed with a casual snap of the fingers, and their own moral starting points might even be different when viewed historically. It is simply to suggest that those systems which are currently facing the uncomfortable choice between ‘unjust factors’ and ‘absence of basis’ (I think here primarily of England and the United States—it may already be too late for Canada10) may reasonably regard basic arguments about responsibility as 3 S Meier, Irrtum und Zweckverfehlung (Tübigen, Mohr Siebeck, 1999). See also S Meier and R Zimmerman, ‘Judicial Development of the Law, Error Iuris and the Law of Unjustified Enrichment’ (1999) 115 LQR 556; S Meier, ‘Unjust Factors and Legal Grounds’ in D Johnston and R Zimmerman (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) ch 2; S Meier, ‘No Basis: A Comparative View’ in A Burrows and Lord Rodger of Earlsferry (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006) 343. 4 ‘If anyone can show me, and prove to me, that I am wrong in thought or deed, I will gladly change. It is only persistence in self-delusion and ignorance which does harm.’ Marcus Aurelius, Meditations, trans Staniforth (London, Penguin, 1995) 39. 5 P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn, 2005). 6 Ibid, 108–13. The last straw for Birks and the catalyst for his change in approach was the ‘closed swaps’ case of Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (HL). 7 R Zimmerman, ‘Unjustified Enrichment: the Modern Civilian Approach’ (1995) 15 Oxford Journal of Legal Studies 403. 8 G Dannemann, ‘Unjust Enrichment as Absence of Basis: Can English Law Cope?’ in Burrows and Lord Rodger, n 3 above, 377. 9 P Watts, ‘Unjust Enrichment’ (2005) 121 LQR 163, 166 (reviewing P Birks, n 5 above). 10 See below, Part IV; M McInnes, ‘Making Sense of Juristic Reasons: Unjust Enrichment after Garland v Consumers’ Gas’ (2004) 42 Alberta Law Review 399.

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legitimate reasons to affirm their historic preference for the former. Given the upheaval likely to be entailed by any serious shift to the civilian model and the perceived (relative) neutrality of the respective approaches for generating the answers which are considered right,11 such arguments constitute an important additional consideration, and must be thrown into the scales of the debate before any final tipping point is passed. Part II tackles the foundational question of moral and legal responsibility for gains in a bid to determine the appropriate starting point for the modern law. Part III assesses the implications of our findings on this issue for the way in which legal reasoning is structured in unjust enrichment claims. It defends the traditional common law approach as morally rational, coherent in reasoning terms and potentially easier to control than the civilian-style model recently favoured by Birks. Part IV looks briefly to the future, assessing the prospects of the latter scheme in the light of recent developments in Canada, the United States and England. The reader should be aware throughout that the language of ‘unjust enrichment’ is still unstable in common law jurisdictions and that I accord the concept a broader scope than Birks recently thought advisable. In particular, I include within its reach cases of restitution for wrongs,12 whereas the modern Birksian scheme13 includes only cases in which the obtaining of a benefit entails no breach of a primary legal duty. The difference in approach stems from a different understanding of the concept’s function in judicial reasoning, not from any real disagreement about the details of the various rules governing restitutionary recovery. It does not impact heavily on the arguments set out below, but I mention it at the outset to avoid confusion.

II

M O R A L AN D L E G A L R E S P O N S I B I L I T Y F O R G A I N — W H E R E D O W E S TA RT ? One man’s gain is another man’s loss (Anon) Iure naturae aequum est neminem cum alterius detrimento et iniuria fieri locupletiorem (It is by nature fair that no one should gain through another’s loss) (Pomponius)14

11 Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL 49, [155], per Lord Walker; A Burrows, ‘Absence of Basis: The New Birksian Scheme’ in Burrows and Lord Rodger, n 3 above, 44. 12 Some of the reasons for this choice are set out in K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in J Neyers, M McInnes, S Pitel (eds), Understanding Unjust Enrichment (Oxford, Hart Publishing, 2004) 79. This has recently become a minority position, though it underpins the most recent draft of the Restatement of Restitution and Unjust Enrichment (3rd) (American Law Institute, 2000). 13 See n 5, above. 14 De Regulis Iuris, D50, 17, 206. More literally: ‘It is by nature fair that no-one should gain at the cost of harm and injury to another.’ See, similarly, D 12, 6, 14: ‘nem hoc natura aequum est, neminem cum alterius detrimento fieri locupletiorem.’

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These two quotations appear to endorse two diametrically opposed moral starting points for the debate about responsibility for gain. The first reflects a liberal philosophy, according to which profiting at the expense of others is prima facie morally acceptable unless a reason can be shown as to why it might be wrong. It shrugs its shoulders indifferently at the equation between one person’s profit and another’s loss. The second apparently adopts quite the contrary premise: that enriching oneself in this way is morally wrong unless it can be justified. It is possible that the two statements reflect the different values of different ages and societies,15 but whether or not that is so, the former more closely reflects social attitudes in modern, liberal market economies. It resonates with the spirit of laissez-faire market individualism, which was at its height in England in the nineteenth century and which—though undoubtedly tempered somewhat during the course of the twentieth—continues to prevail in commercial contexts to this day. This does not mean that all profit-making is acceptable, of course, even in a free-market economy. Where such activity infringes a legal right or can otherwise be shown to be unjust, it may be actionable by the person against whom the injustice has been done. It does mean, however, that good moral and legal reasons have to be provided before an enriched party can be required to explain her gains to another, even where there is a measure of correspondence between those gains and the other’s loss.

A

Harmless Gains

A credible starting point for this argument is the assumption (qualified significantly below) that the making of gains—in contrast to the infliction of losses—does no harm to anyone.16 Harm is a key precondition of the liberal state’s intervention in the affairs of its citizens because this maximises the freedom of us all.17 It may equally serve as a legitimate prerequisite of civil liability. True, this entails flipping the argument out of its original context in political theory into the domain of private law doctrine, and it inevitably entails implicit and difficult assumptions about the definition of ‘harm’,18 but the same, basic, liberal approach nonetheless 15 For the interesting suggestion that the latter statement might be at home in the context of a Marxian economy, see J Dawson, Unjust Enrichment: A Comparative Analysis (Boston, MA, Little Brown, 1951) 5–6. 16 As P Jaffey says in The Nature and Scope of Restitution (Oxford, Hart Publishing, 2000) 17, benefits are a ‘matter of celebration, not regret’. Unfortunately, Jaffey derives from this proper premise the more questionable conclusion that unjust benefits cannot provide a systematic basis for a field of law. In this, he falls prey to the same trap as Wonnell and Dagan, discussed at n 22, below. 17 JS Mill, On Liberty (Harmondsworth, Penguin, 1974) 68. 18 For current purposes (that is, in defining the proper reach of unjust enrichment law), I take harm to include not simply factual loss, but any deprivation of legal entitlement or infringement of private legal right.

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seems logically appropriate to both. If it is harm (actual or prospective) that justifies the state’s uninvited intervention in our lives, such harm can also provide a salient precondition of our conduct (act or omission) being rendered actionable by our fellow citizens—of it attracting the attention of private law.

B Gains Related to Losses The above argument assumes, of course, that profit-making can be done without causing others any loss, either by way of reliance loss or by disappointed expectation. It posits a vision of the world in which profiting can be something other than a ‘zero-sum’ game. Classical economics supports this possibility,19 though some legal scholars have questioned it.20 But even if we suppose that in practice profit-making does cause some loss, so that our gaining regularly attaches us in a causal way to economic damage to others,21 this causal link is almost certainly too weak a foundation to ground moral responsibility for the gain, or to justify making us legally liable to yield it up. This point has not yet been finally settled;22 however, support for it may be gleaned, I suggest, from the important work done by Tony 19 The fact that the transfer of a good from A to B can yield a gain to B in excess of the loss to A (because B values the good more highly than A) forms the very basis of the incentive to transfer it under classical economic theory, assuming rational actors. Since value is at least in part a function of personal preference, it is therefore entirely feasible that gains by B could be unattended by any loss to A. 20 L Smith, ‘Three-party Restitution: A Critique of Birks’ Theory of Interceptive Subtraction’ (1991) 11 Oxford Journal of Legal Studies 481, 483. The critique is directed at cases in which wealth has been subtracted from one party by another. 21 In many cases of unjust enrichment, the gain does not ‘cause’ the loss, the classic example being that of the wholly spontaneous (uninduced) mistaken payment. See discussion in the text, below. 22 In support, see C Wonnell, ‘Replacing the Unitary Principle of Unjust Enrichment’ (1996) 45 Emory Law Journal 153; H Dagan, The Law and Ethics of Restitution (Cambridge, MA, Harvard University Press, 2004) 18; J Gordley, Foundations of Private Law (Oxford, Oxford University Press, 2006) 423–5. By contrast, in ‘What Renders Enrichment Unjust ?’ (2001) 79 Texas Law Review 1927, Mark Gergen argues that the mere correspondence between a gain and another’s loss explains restitution for unjust enrichment. This is attributed not to any truth disclosed by modern moral philosophy, but to ‘underlying instincts of justice’ (1948) or ‘basic instincts and values’ (1929), which may include dissatisfaction with the role of chance and change in our lives, the instinct for possession, dislike of human cunning and ‘perhaps, just a touch of envy’. As Dagan points out, however, envy cannot provide a moral basis for a legal claim, nor, one might add, can any of the other instincts which Gergen identifies. Whilst the argument in the text below suggests that both Dagan and Wonnell are correct in their intuition that merely gaining from another’s loss discloses no basic case for moral responsibility, they questionably derive from this intuition the conclusion that the principle against unjust enrichment is suspect from a normative point of view. Against, see K Barker, ‘Theorising Unjust Enrichment Law: Being Realist(ic)?’ (2006) 26 Oxford Journal of Legal Studies 609, 612–17. For another distinguished proponent of the view that the mere causal connection of gain constitutes a special phenomenon attracting the attention of corrective justice, see Dawson, n 15

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Honoré23 and Peter Cane24 in the context of their recent inquiries into a defendant’s responsibility to compensate for losses in the law of tort. Their work is relevant precisely (probably also only) because of the point posited above—that one’s responsibility for gain is contingent on its relationship to some harm to another. If gaining is questionable only to the extent that it is related to harm, then ideas about responsibility for harm bear logically on the question of responsibility for gain. Significantly, Honoré’s work places a far higher degree of significance upon causation in questions of responsibility than most, but even he ultimately concludes that causing harm is a necessary, but not a sufficient, condition of responsibility in corrective justice.25 His much-acclaimed theory of ‘outcome-responsibility’26 is thus said to provide a possible moral basis for a party’s liability to compensate another in the law of tort, but it does not itself generate any liability to pay for damage done.27 Our moral responsibility for harm is still distinct from our responsibility for it as a matter of outcomes and is complete only when the harm’s infliction is shown to be unjustified.28 above, 6: ‘no matter how great the observer’s detachment . . . it will appear incongruous that the legal order permits one person or group to retain a measurable gain that is the product of another’s loss’. Dawson describes this idea as having a ‘strong appeal to the sense of equal justice’ (8) and as ‘so simple and so clearly just’ (151), but does not further expound the nature of the normative arguments which underlie this moral ‘sense’. T Honoré, Responsibility and Fault (Oxford, Hart Publishing, 1999) chs 2, 4. P Cane, Responsibility in Law and Morality (Oxford, Hart Publishing, 2002). This excellent work extends the inquiry about responsibility well beyond the law of torts. See generally chs 1, 2, 3, 6. 25 Honoré, n 23 above, 75. The fact that causation of harm is required for a corrective justice claim does not rule out the theoretical possibility of a claim based on distributive justice even where causal link between gain and loss is absent. Such a claim would still have to be based, however, on the violation of a distributive norm, not on the simple fact of the gain and the loss. See further the text below. 26 ‘We are, if of full capacity and hence in a position to control our behaviour, responsible for the outcome of our conduct, whether act or omission’ (Honoré, n 23 above, 76). Such responsibility is ‘an essential constituent of our character and identity, without which we would lack both achievements and failures’. The justification for outcome responsibility lies in a form of distributive justice (78–9): if we take the benefit of good luck, we must bear the risk of bad luck. For a full exposition, see ibid, ch 2. 27 Ibid, 77–8. 28 Ibid, 78. Honoré’s position on the relationship between outcome-responsibility and moral responsibility is complex and Cane has gone so far as to accuse him of internal inconsistency: P Cane, ‘Responsibility and Fault: A Relational and Functional Approach to Responsibility’ in P Cane and J Gardner (eds), Relating to Responsibility (Oxford, Hart Publishing, 2001), 96. Cane indicates that some sections in Responsibility and Fault suggest that moral responsibility requires conduct which is at fault, whereas other sections do not. Honoré sets out to clarify his views in Cane and Gardner, ibid, 228–9. Here, moral responsibility is distinguished from both moral blame and legal liability and is said to follow simply from causing harm: ‘outcome responsibility . . . entails moral responsibility, at least where one’s conduct impinges on someone else; but it need not entail either moral blame or legal liability’. Since this passage is intended to be clarificatory only, it should presumably still be read in the light of the statement referred to in the text to this note, that causing harm to others must still be unjustified to give rise to any moral obligation to correct it. If so, although the idea of outcome responsibility points toward moral responsibility, it is not co-extensive with it. Although we may have to 23 24

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Furthermore, for legal responsibility (liability) to arise, our conduct must not simply cause loss, it must actively violate a normative standard29—it must be wrong. This does not necessarily mean that it need be faulty, in the sense of being dishonest or falling below an objective standard of reasonable care. Indeed, one of the main purposes of Honoré’s theory is to support the idea that tort liability for harm can ethically be strict.30 Nonetheless, the violation of some social standard of behaviour and some right31 of the claimant is required before legal liability can follow. If this is so, even if we assume that a defendant’s gainful behaviour has caused a particular claimant a loss, it is most unlikely to be enough to make him accountable for the gain. Any moral or (distinct, but connected) legal obligation to make restitution requires the defendant to have violated a normative standard in the way he made or retained the gain. Not only is the mere fact of gain insufficient to make one responsible to others in private law (though it can clearly constitute a taxable event grounding distinct responsibilities to the state), the fact that a gain can be shown to have caused another’s loss is also insufficient. Something more is needed to taint our profit. Furthermore, if this is so where a genuine causal relationship exists between a defendant’s gaining and a claimant’s losing, then it is certain to be the case in those instances in which the gain merely ‘correlates’ to the claimant’s loss, as where an employee simply receives a mistaken overpayment at the end of the month from his employer. Such cases, where the defendant’s gain is caused not by the defendant himself, but rather by the claimant’s own (or a third party’s) conduct, are common in unjust enrichment law.32 Indeed, many scholars, including Birks,33 present the case of the uninduced mistaken payment as the paradigm example of unjust enrichment, around which our entire understanding of the subject should be built. In either event, however—whether the relationship between gain and loss is truly causal (gain bringing about loss) or merely correlative in the looser sense evidenced in such instances (gain being brought about by the loss), the relationship is insufficient in itself to ground moral or legal responsibility to relinquish the gain. Without some acknowledge authorship of the harm that we do, that does not necessarily mean that we have a moral obligation to do anything about it. This is in part a function of social norms. 29 Honoré, n 23 above, 78. Outcome responsibility is simply a basis on which the law ‘can erect a duty to compensate if there is a reason to do so’. There is a reason to do so if the conduct in question is ‘socially undesirable’ and ‘if there is also a reason to treat the harm suffered as the violation of a right’, though even then there may be no liability if this would conflict with ‘other values important to maintain’. 30 Ibid, ch 2. Note, however, that fault requirements can be justified on Honoré’s thesis in order to accommodate countervailing values, such as the idea of proportionality between moral blame and legal penalty: ibid, 85. 31 Ibid, 75, 80. ‘Right’ is not defined in these passages. 32 For another example, where gain is caused by third party misconduct, see Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL). 33 Birks, n 5 above, 3.

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positive reason describing an injustice, gain and loss are, as McLachlin J once succinctly put it in the Supreme Court of Canada, ‘morally neutral’.34 Professor Cane’s recent criticisms of Honoré’s outcome-responsibility thesis do nothing, I think, to undermine this conclusion. The point Cane is most keen to make is that the theory is too agent-focused to provide a full account of our moral and legal responsibility practices, because it concentrates too little on their relational and functional aspects.35 This observation, which is compelling in the context of tort law, is probably equally valid when brought to bear on the law of unjust enrichment, because it is clear from the cases that legal liability for gain is often bounded by—if not, indeed, exceptionally even grounded in—policy considerations with a functional, social dimension.36 Responsibility for harm (and, by logical extension, for gain related to harm) is not just (though it is often in large part) an issue of what a defendant has ‘done’. It is also a function of the relationship between the parties, and of our broader social goals. Although Cane shares Honoré’s view that private law does corrective justice, he is therefore keen to show that the ideas of ‘injustice’ which trigger corrective compensatory and indeed restitutionary obligations tend to be defined by courts with a view not simply to a defendant’s role in the events which have happened, but also to broader distributive considerations.37 Strict compensatory liabilities in tort tend, hence, to be justified by the interests of victims and society, not by ideas about outcome-responsibility.38 And it is a distributive norm, he argues, which explains the employee’s restitutionary obligation to repay his employer in the spontaneous mistake case mentioned above. It cannot in this particular case be a norm focusing on the employee’s conduct, because the employee did nothing to bring the enrichment about.39 The exact characterisation of the norm founding recovery in the mistake case continues to excite controversy40 and cannot satisfactorily be Peter v Beblow [1993] 1 SCR 980, 990 (SCC). Cane, n 28 above, 81; n 24 above, 49–56. For this reason, the claim that outcome responsibility is ‘basic’ and that moral and legal responsibility are simply enhanced versions of it is regarded as unconvincing. This does not, Cane indicates, detract from the power of outcome responsibility as a motivational or ontological theory. 36 The clearest examples are probably cases involving necessitous intervention. See generally A Burrows, The Law of Restitution (London, Butterworths, 2nd edn, 2002) ch 9. 37 Cane, n 24 above, 186–90. On Cane’s understanding of the relationship between corrective and distributive justice, see further ‘Corrective Justice and Correlativity in Private Law’ (1996) 16 Oxford Journal of Legal Studies 471, 478–81. Note also that Honoré’s outcome-responsibility thesis itself depends on the distributive principle of taking the rough with the smooth. 38 Cane n 28 above, 109. 39 Cane, n 24 above, 208. See further D Klimchuk, ‘Unjust Enrichment and Corrective Justice’ in J Neyers, M McInnes and S Pitel, n 12 above, 111. 40 See, most recently, P Saprai, ‘Restitution Without Corrective Justice’ [2006] Restitution Law Review 41. 34 35

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resolved here. I postpone it for the moment simply to avoid distraction, whilst observing that cases of mistakes which are entirely uninduced may not actually be as paradigmatic as has been suggested. The key points to derive from the above arguments are twofold. First, when it comes to questions of moral and legal responsibility for harm, both Honoré and Cane share the crucial insight that more than simple causation is required. Secondly (and by extrapolation), this casts doubt upon the propriety of the assumption apparent in Pomponius’ maxim, that gains which are related to the losses of others (in either the causal or, indeed, the looser correlative sense) are in themselves questionable and require justification. If that maxim were rewritten to accord with Honoré and Cane’s more recent thinking about moral and legal responsibility, it would more probably read: ‘It is by nature fair that no one should gain unjustly through another’s loss.’ That would clarify the importance of demonstrating that a gain has been made or retained in violation of some behavioural (or, if Cane is right, distributive) norm. Perhaps that is what Pomponius meant. I am unqualified to speak on that issue and my speculation on the historical point may consequently be facile. If the terms ‘gain’ and ‘loss’ in the maxim are understood normatively, rather than factually (as Ernest Weinrib has suggested we should interpret references to gain and loss in Aristotle’s Nichomachean Ethics),41 then this is a possibility. That is a matter for translators, Roman lawyers and legal historians to settle, though I doubt whether there is ultimately much profit in the forensic exercise when it comes to determining the basic issue for current times.

C

Legal Responsibility—the Need for Violation of a Normative Standard

If we accept what I suggest to be the logical thrust of Cane and Honoré’s arguments (and I recognise that extrapolation is required in this), gaining is not morally wrong simply because it has caused (or is the product of) another’s economic loss. Moreover, legal responsibility (liability) for the gain depends upon the violation of some normative standard on the part of a defendant. Either their act in obtaining it or their omission to give it back must—in the language of the English law of restitution—be ‘unjust’. Further reflection discloses a number of good reasons why gaining through another’s loss does not generally violate any such norm. The foremost of these is that the freedom to profit constitutes an important aspect of our personal autonomy—a point emphasised on several recent occasions by McHugh J in the context of tort actions for negligently 41

E Weinrib, ‘The Gains and Losses of Corrective Justice’ (1994) 44 Duke Law Journal 277.

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caused pure economic loss.42 Just as we should be free to pursue choice in the private aspects of our personal lives, so too we must be free to set about enhancing our wealth through legitimate economic competition with others. The protection of this personal liberty may also, incidentally, have beneficial economic consequences for society as a whole, though the force of the moral argument does not depend on these consequences. At one point in his discussion, Honoré alludes overtly to this libertarian value. Indeed, it forms the basis of the view he states in the following passage in Responsibility and Fault, that moral responsibility for harm depends not simply on our causing it, but upon its infliction being unjustified:43 I win the one hundred metres and you lose. Outcome responsibility makes me responsible for your defeat as well as for my victory. But the nature of the race justifies me in inflicting that setback on you. The same is true of other forms of competition, for example in trade, business, politics, literature and love. If some succeed, others fail.

Though set in the context of the debate about tort liability for loss, the same line of reasoning is apposite to one’s accountability for gains. Whilst the ‘gaining’ winner is responsible for his win in the sense that he is an agent of it and is also, in the example provided, an agent of the loser’s loss, this is very different from saying that he has even a prima facie moral or legal obligation to explain or relinquish his prize. Indeed, the final, italicised sentence of the cited paragraph is very close in tenor to the first of the two maxims identified at the outset of this section (‘one man’s gain is another man’s loss’). Whether Honoré would formally align himself with the moral position I have associated with that maxim is not entirely clear and I hesitate to put words into his mouth, particularly given the strength of his Roman law roots. A preference for this position nonetheless appears to be appropriate—at least, I suggest, in the context of a society which places a high priority on the values of personal liberty, trade and economic competition. It is conceivable that different norms and standards of behaviour might apply to the practice of gaining in different societies—or, indeed, in non-commercial contexts—but if one is forced to make a generalisation (as indeed we are, if we are to set any starting point for our legal analysis), this appears to be the far safer reflection of the liberal point of view. Unless there is some specific reason to be doubtful of them, our modern point of departure must be that gains require no moral or legal explanation.

42 Hill v Van Erp (1997) 188 CLR 159 (HCA), 164; Perre v Apand [1999] HCA 36, [114–115]. 43 Honoré, n 23 above, 78. In both instances, the emphasis is mine.

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I M P L I CAT I O N S F O R L E G A L R E A S O N I N G : T H E S T RU C T U R E OF UNJUST ENRICHMENT CLAIMS

What are the implications of all of this for the structure of our reasoning in unjust enrichment law? If the latter’s architecture is to be constructed in such a way as to align with our basic responsibility judgements, it follows that for a gain to be even prima facie legally questionable it must be shown both (i) that it is causally linked or (more loosely) correlated to some harm a claimant has suffered (whether in the form of loss or infringement of right) and (ii) that it is unjust in the sense that its receipt or retention violates a normative legal standard. Moreover, the onus on both these issues should lie with the claimant.

A

The Moral Rationality of the Common Law Scheme

This in turn suggests that the common law’s traditional approach to questions of unjust enrichment is not simply pragmatically defensible, but morally rational. Given its liberal premise, it makes no moral sense for it to ask as its primary super-structural question whether a defendant’s gain is justifiable by reference to some legal ground or, as the Canadians say, ‘juristic reason’.44 That which is prima facie morally and legally justified requires no justification. Furthermore, for it to embark upon the legal inquiry by asking whether there was such a ground for the enrichment (as the civilian method does) only then tends to confuse positive and negative justifications.45 Positive justifications for liabilities provide reasons for them, whereas negative justifications simply remove what would otherwise be reasons against them. The various legal ‘grounds’ of enrichment under the civilian approach (the existence of a valid contract or debt, for example) express reasons against a defendant’s liability, not reasons for it, and are therefore logically significant only in circumstances in which a claimant has also shown a reason why a given gain is prima facie wrong. To set the (positive) cause of action requirement in English unjust enrichment law in terms of the absence of such reasons against liability is therefore not simply misleading (insofar as it falsely implies that the absence of a negative proves a positive), but actually logically incoherent.46 Crucially, this point about incoherence holds, whichever party is made to bear the onus of proof. So, even if it were the case, as it is under some See further Part IV, below. This distinction is drawn from J Raz, ‘Promises in Morality and Law’ (1982) 95 Harvard Law Review 916, 929. 46 If the list of possible grounds is open, requiring a claimant to prove their absence would also be practically impossible: L Smith, ‘The Mystery of Juristic Reason’ (2000) 12 Sup Ct Law Review (2d) 211, 228. 44 45

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civilian systems47 and as it may be under Birks’s proposed scheme,48 that the burden rests upon the claimant to show that there is no basis for a defendant’s enrichment, the law will still, by forcing him to discharge this burden, lock him into the paradoxical proof of a negative. He must first and foremost prove that there is no reason against his success, but he need not advert openly to any reason for it. This is precisely the sort of reasoning process encouraged by political candidates during election campaigns, but that scarcely recommends it, one would have thought, to the law. Demonstrating the absence of a good reason to vote Labour does not make the case for voting Conservative. Moreover, the idea that it does is actually very dangerous. Not only is there a significant risk (which politicians of course exploit to the full) that some voters may be misled, but even those of us who recognise the trick and discount negative campaigning as spin are left with the nagging suspicion that there is something importantly skewed about the nature of the justificatory arguments in play. We rightly sense that the real reasons which we ought to be addressing when casting our vote have not properly been enunciated. The negative campaign simply has not aired the matters that need to be aired if we are to make properly reasoned moral, political and (in this case) legal decisions.

B Two Possible Counter-arguments At this point, supporters of the civilian approach might raise two objections. First, they might reproach me for misrepresenting what is proposed by the model. They will point to the persistence at the ‘lowest level’ of the Birksian reasoning ‘pyramid’49 (discussed below) of particular positive reasons which explain why, at a higher conceptual level, an enrichment lacks a legal ground. This, it might be thought, accommodates the point about the failure of the method to make proper reference to the positive justifications which are needed to make out a basic moral and legal case for restitution. If we inquire further into the reason why there is no basis for an enrichment, we will generally also, it is said, detect a positive reason why restitution should be made.50 So, for example, in many (but not all) cases in which restitution is based on the absence of a valid contract, it could be the 47 Eg Germany (S Meier, ‘No Basis: A Comparative View’ in Burrows and Lord Rodger, n 3 above, 345, 350–1). This also appears to be the position in the mixed jurisdiction of Canada. 48 The issue of onus is not clear, but this seems to be the apparent implication of absence of basis being described as the ‘only unjust factor’ under the scheme: Birks, n 5 above, 115. 49 Ibid, 116–17. See Figure 1, below. 50 Ibid: ‘Subject to some very rare exceptions, it will be true of every case in which an enrichment is received without any explanatory basis that its claimant will not have intended it to accrue to the defendant.’ See also 104, where the civilian approach is described as ‘a different method of showing that the claimant did not intend the defendant to be enriched at his expense’.

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existence of a mistake, misrepresentation or other ‘vitiating factor’ which explains the contract’s invalidity. This is clearly true, but does not advance the case for adopting the civilian approach very far. Indeed, if the point is that positive reasons for restitution are actually implicit in the civilian approach too, the ironic effect is to affirm the basic moral stance currently entrenched in the common law and even to hint that the civil law shares it. It implies, as Meier has herself recently suggested, that what we should really be doing is inquiring into the various specific categories of unjust enrichment case, asking in each instance ‘what the reason for restitution really is’.51 Furthermore, the point does nothing to address the incoherence of giving expression to the variety of positive reasons for restitution through the deployment of a negative governing principle. Although the absence of legal ground for enrichment may happen to coincide with the existence of positive grounds for recovery, it cannot be regarded as in any sense expressing those reasons. From this point of view, the apparent elegance of the pyramidal Birksian reasoning structure, in which lower level (positive) reasons for restitution underpin a higher-level, abstract legal principle (absence of legal ground), is highly misleading. The negative form of that governing principle is actually incompatible in reasoning terms with the positive form of the root justifications which are required to make out a moral or legal case.52 Although Birks therefore suggests at one point that his model provides a ‘limited reconciliation’ of civilian and common law reasoning methods,53 it is actually riven by deep-set contradictions of mind. It is motivated morally by one set of (positive) reasons, but gives us a formal explanation for its behaviour which is of an entirely different and contrary sort.54 The second objection which civilians might legitimately raise is that I am falsely implying that it is only positive reasons which count in responsibility judgements in unjust enrichment cases. This is clearly not true and is no part of my case. There are all sorts of reasons why, despite the claimant having shown a ground for restitution, his claim should nonetheless fail. The existence on the facts of a valid contractual allocation of risk has always been one. The point, however, is that whilst these negative reasons clearly have to be weighed against the positive ones in reaching decisions Meier, n 47 above, 361. My emphasis. This point about the incompatibility of positive and negative justificatory reasoning is more fundamental even than the legitimate objection raised by R Stevens that it is obscure: ‘The New Birksian Approach to Unjust Enrichment,’ [2004] Restitution Law Review 260, 273. 53 Birks, n 5 above, 116. 54 Note that Birks himself suggests the depth of this contradiction at several points in his work: ibid, 44–5, 112, 113, where absence of basis and unjust factors are described as ‘incompatible bedfellows’ which ‘cannot be mixed’ and as ‘categorically incompatible’. The tension between these descriptions and the strategy of reconciliation set out at n 53 above is never satisfactorily resolved. 51 52

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about liability (and, indeed, may flatly override them), they do not express the positive case. Their absence cannot, as Birks suggests, be the ‘reason why there has to be restitution’55 or the ‘master reason’56 for restitutionary recovery in English unjust enrichment law, any more than the absence of a particular good quality in one particular political candidate can be the master reason for voting for another. The absence of a negative reason against liability (valid contract) and the presence of a positive reason for it (such as a misrepresentation on the part of the defendant) may indeed coexist on the same facts. The negative justification is not, however, a more abstract, higher-level way of expressing the positive one.

C

Organising Positive and Negative Reasons in Unjust Enrichment Law

Exactly how we integrate these important, countervailing reasons against restitutionary recovery into our legal analysis is not settled. Some, such as an innocent change of position on the part of a benefit’s recipient, are easily accommodated outside the cause of action debate, within the defences inquiry. Others, such as the concern not to undermine a defendant’s freedom of choice, pervade the various ‘tests’ which a claimant must satisfy in order to prove that the defendant has been enriched.57 Still others, like the concern to ensure that the aged are not unduly infantilised by transactional reversal, or the concern that restitutionary rights do not unduly constrain the availability of business finance, seem to work their way into more stringent ‘fault’ requirements attaching to particular restitutionary causes of action, such as incapacity, unconscionable transactions and undue influence.58 More difficult to locate are higher-order concerns, such as the fear that restitution might contradict settled principles of other areas of law (like contract or property law) regulating parties’ rights. In theory, such worries could again be accommodated by defences: we could leave it to defendants to prove that restitution would cause an irrational contradiction in legal policy or private right. In practice, however, the existence of a valid contractual risk-allocation is likely to remain a concern which it is left to the claimant to displace, simply because of the presumptive social importance we attach to the apparent security of contracts. One analytical solution helpfully suggested by Graham Virgo is that we regard the existence of such a risk-allocation as a bar to restitution59 (akin to a Ibid, 113. Ibid, 116. See generally Burrows, n 36 above, 16–25. See G Virgo, ‘The Role of Fault in the Law of Restitution’ in Burrows and Lord Rodger, n 3 above, 83, 97–100. 59 G Virgo, The Principles of the Law of Restitution (Oxford, Oxford University Press, 2nd edn, 2006) ch 23. 55 56 57 58

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defence, save in the crucial detail that the onus lies squarely with the claimant). Less elegantly, it could be viewed as an argument which the claimant must overcome in order to establish that a defendant’s enrichment is unjust—it cannot be unjust, we might say, for a defendant to receive that to which he has an existing legal right, contractual or otherwise. This is the way in which similar concerns are accommodated in cases of negligently inflicted pure economic loss, where the prospect of conflict between liability and consensual risk-allocation makes it more difficult for a claimant to prove that a defendant owes him a duty of care.60 Either way, it is crucial to grasp that the mere fact that the onus in relation to some of these important policy concerns legitimately lies with the claimant fails to justify shifting the entire structural apparatus of unjust enrichment law into a reverse, negative justificatory mode. Countervailing concerns of this sort rank alongside the positive reasons for restitution on the same moral reasoning scale; their absence does not provide an appropriate conceptual superstructure or starting point for our reasoning in unjust enrichment law. The contrast between the way in which common law traditionally accommodates such ‘negativing’ concerns and the way in which they feature in the superstructure of the new Birksian scheme is illustrated crudely in Figures 1 and 2.

Fig 1. The New Birksian Scheme: a Negative Justificatory Framework (absence of negative reasons provides the cause of action)

60 J Fleming, ‘Tort in a Contractual Matrix’ (1995) 3 Tort Law Review 12; Bryan v Maloney (1995) 182 CLR 609 (HCA), 622 per Mason CJ, Deane and Gaudron JJ (obiter); Johnson Tiles Pty Ltd v Esso Australia Ltd [2003] VSC 27 (SC of V), [1144]–[1145]; Simaan v Pilkington Glass [1988] QB 758 (CA); Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 (HL).

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Fig 2. The Traditional Common Law Scheme: a Positive Justificatory Framework (negative reasons weigh against positive justifications in determining the existence of unjust factors, causes of action, bars and defences)

The crucial difference between the schemes identified in these diagrams lies in the way in which arguments against restitution are integrated into the legal analysis. In Figure 1, their absence provides part of the very analytical structure of the claim. It is both the starting point and the determinant of the cause of action question. In Figure 2, the presence of negative reasons is weighed by courts against the presence of positive ones, feeding into the various rules which a claimant must satisfy in order to establish an unjust factor or overcome a bar to recovery; or in order for the defendant to establish a defence.61 The contrast between the approaches is most easily highlighted by focusing on the case of a payment made under a contract which was mistakenly believed by the payer to be valid. In the Birksian scheme, the contract’s invalidity itself provides the ground for restitution. By contrast, under the ‘common law’ model, the claimant has to prove the contract’s invalidity before being entitled to claim relief, but this is insufficient to make out his case. He must also prove a causative mistake. The success of the claim depends on proof of both a good reason for recovery and the absence of a valid contractual right in the defendant to retain the enrichment. The weighing of these opposing concerns feeds into the overall

61 Since the expansion of the various restitutionary defences and bars, the need for negative concerns to yield a restrictive definition of the various unjust factors has diminished significantly, as Lord Goff predicted it would in Lipkin Gorman v Karpnale, n 32 above, 581.

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analysis as to whether the claimant can be said to have made out his moral and legal case. Of the two, the analytical structure identified in Figure 2 is more compatible with the basic stance taken by the common law on issues of moral and legal justification; it is more transparent and (bittier though it might seem) it is more coherent in the way it expresses and balances the law’s operative concerns. It is more compatible with the common law’s liberal orientation because it expressly requires positive reasons before stripping a defendant of his gain, rather than demanding an explanation for it; it is more transparent because it does not inter these reasons beneath a pyramidic structure of negative legal justification; and (connectedly) it is more coherent because it aligns the form of the super-structural legal inquiry (is there some positive injustice?) with the underlying substantive (positive) reasons which are determinative of the basic moral and legal case.

D

A Concern about Abstraction.

The common law scheme has one other feature that recommends it. This is the lower level of abstraction at which it describes its rules of recovery. Though it clearly does deploy higher-level concepts (‘injustice’ being the clearest example), the key focus of the model is on low-level reasons for restitution (causes of action) in particular categories of case. The high-level ideas that it deploys work merely as organising tools or ‘umbrella concepts’ and their normative function is weak, in the sense that they are not used to determine outcomes in particular cases, but merely to assist in the development of the various detailed rules on mistake, misrepresentation, influence, incapacity, restitution for wrongdoing and so on. In the civilian model, by contrast, the high-level concept of ‘absence of legal ground’ is itself the governing cause of action. English law has long been hostile to the formulation of causes of action at abstract levels, on account of their capacity to get out of hand. It prefers to proceed cautiously, through the careful, incremental extension of particular instances of recovery. Whilst higher-level generalisations are hence used to help guide the development of particular, lower-level rules, they are not accorded the powerful governing significance that they are in a scheme based on absence of legal ground. From this point of view, the proposed Birksian scheme is objectionable not only because it suggests the wrong basic normative orientation for the common law, but also because it frames the governing cause of action at too high a level of generality. The potential price of this powerful combination of abstraction with a reversed justificatory orientation is the overexpansion of restitutionary rights.

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There is no doubt that Birks sensed this danger.62 To allay it, he suggested that the approach might be controlled by vigorous defences63 and through the recognition of a number of defined ‘grounds’ for enrichment.64 There are, however, reasons to doubt the viability of this control strategy, which are both principled and pragmatic in nature. I examine these in turn. At the level of principle, the tactic again runs into significant difficulties from the point of view of transparency and coherence. We have already noted that, if the moral and legal starting point is that a claimant must justify his claim, it is logically questionable for his cause of action to be framed in terms of the absence of a reason against the defendant’s liability. However, the incoherence of this approach is further compounded if one then tries to rein in its potentially overexpansive consequences by constructing moral reasons against recovery (‘grounds’ of enrichment), which equate in substance to the absence of any positive reason why the claim should succeed. That simply engages in a guilty rerun of the same sort of illogic. Unfortunately, this is what the Birksian approach appears to do. The proposition is very compressed, I appreciate, so an example should help. The best-known example is presented by Birks’s discussion of cases involving ‘incidental benefits’ or ‘by-benefits’.65 The owner of an apartment, A, benefits ‘incidentally’ from the heat generated by his downstairs neighbour, B, during a cold winter. Everyone accepts that B has no restitutionary claim against A,66 but the question is: why? The common law’s answer is simple. B can show no mistake or formal qualification to his consent to A’s gain which might make the latter in any way morally or legally questionable. Alternatively, B has not been harmed by A’s gaining, because the gain has not been obtained in violation of any right of B’s and because B would have lost the heat in any event, even if A had not made something of it. The gain was therefore not ‘at B’s expense’. Either way, the gain appropriately rests where it has fallen (risen?) and the advantage it brings to A requires no justification on his part. By contrast, the Birksian approach reaches the same result via a route which is, with respect, more convoluted and less coherent from the justificatory point of view. Birks thus maintains that B’s claim fails not because there is no basic moral case for recovery (though significantly he does not actually identify what B’s moral case is), but because there is a countervailing reason against restitution: B’s heat was a gift.67 Birks, n 5 above, 113, 127. Ibid, 113. Such as gift: ibid, 148. Ibid, 158–60. Edinburgh and District Tramways v Courtenay [1908] 16 SLT 548 (Court of Session, First Div). 67 Birks, n 5 above, 158. 62 63 64 65 66

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With respect, this explanation fictionalises the existence of a positive donative intent in respect of a benefit about which B probably knew nothing. The distinction between benefits which are intended and those which are desired, which Birks uses to defend this construction,68 fails to meet the point that in most cases the benefit is in fact neither. The explanation also constructs as a reason against liability (‘B intended a gift’) what is actually the absence of a positive reason in favour of it (B’s consent to the provision of a benefit did not fail). Not only is this confusing, it seems a protracted way of getting the common law back to its own, very simple starting point. Why would we even conceive of such a circular journey unless we were forced that way? Whilst it would be quite wrong to suggest that all the ‘grounds’ for enrichment under the civilian approach are similarly contorted reconstructions of cases in which there is no basic moral claim,69 the example illustrates the hoops through which civilianstyle models sometimes have to jump simply to confirm an intuition which is already entirely morally basic to the common law. Should we really have to fight so hard to stand so still? This seems very doubtful, but it is apparently an inevitable by-product of the control strategy required to keep the abstract, civilian system in check. Turning to the pragmatic point of view, it also seems doubtful whether the formulation of ‘grounds’ for enrichment will be perceived by many judges to provide a sufficient check upon the potential expansionism of Birks’s abstract, negative cause of action. There is an informative precedent here in the way in which Lord Wilberforce’s ‘two stage’ approach to the duty of care question in the law of negligence70 was received by courts in the latter part of the last century. That test produced the same basic forward momentum as the Birksian approach by attaching the notion of a prima facie duty of care to the reasonable foreseeability of harm. Like Birks, Lord Wilberforce sought to address the potentially overexpansive consequences of this by introducing a second stage of reasoning at which courts might consider any ‘negativing’ considerations why recovery should be denied.71 The approach was clearly workable, because it remains current in New Zealand to this day.72 It was nonetheless rejected by both Australian73 and English74 courts as too incautious. By insisting in Caparo Industries v Dickman75 that the onus Ibid. Many of them, such as the existence of a valid debt or contract, describe perfectly good reasons against liability. 70 Anns v Merton London Borough Council [1978] AC 728 (HL), 751–2. 71 Ibid. 72 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (NZCA), 340, per Glazebrook J. 73 Sutherland Shire Council v Heyman [1985] 157 CLR 424 (HCA). 74 Caparo Industries v Dickman [1990] 2 AC 605 (HL). 75 Ibid. 68 69

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lies on a claimant to prove not simply the reasonable foreseeability of harm, but also proximity of relationship and that it will be ‘fair, just and reasonable’ to impose a duty of care, the House of Lords made it clear that the strategy of ‘general principle of liability subject to the brake of defined exceptions’ was too cavalier a way to proceed and too insensitive to the need to identify good reasons for recovery in every new type of case. Incremental development of lower-level rules in particular instances was thought the more prudent way forward and, for better or for worse, it is still so regarded to this day. Whilst some of their Lordships have therefore indicated their willingness in principle to consider the new Birksian scheme as an appropriate blueprint for English unjust enrichment law, as we shall see in the final section of this essay, it is far from clear that the majority will follow this line of thinking unless it proves absolutely necessary. The abstraction it entails is likely to raise judicial eyebrows, if it does not actually stick in throats.

IV

P RO G N O S I S

Predictions as to the shape of the future are always perilous, but the purpose of this final section is to assess the immediate prospects of the new Birksian model in the light of recent developments in Canada, the United States and England. The review of each jurisdiction is brief, and is confined to an attempt to identify the general direction taken and the reasons identified for taking it.

A

Canada

Despite the fierce resistance of a number of distinguished commentators,76 Canadian law seems recently to have taken a definitive plunge in the direction of the civilian approach, for reasons which are at best unclear. As Lionel Smith has pointed out,77 even though Dickson J had sketched a path towards the civilian model in Rathwell v Rathwell78 and Pettkus v Becker,79 no decisive step had actually been taken by end of the last century. It is only more recently, in Garland v Consumers’ Gas Co,80 that a clear election 76 Smith, n 46 above; M McInnes, ‘Unjust Enrichment, Juristic Reasons and Palm Tree Justice: Garland v Consumers’ Gas Co’ (2004) 40 Can Bus Law Journal 103; M McInnes, ‘Juristic Reasons and Unjust Factors in the Supreme Court of Canada’ (2004) 120 LQR 554. 77 Ibid. 78 [1978] 2 SCR 436, 455 (SCC). 79 [1980] 2 SCR 834, 844 (SCC). 80 [2004] SCC 25. See also, affirming this approach with differences in emphasis, Pacific National Investments v Victoria (City) [2004] SCC 75, noted by R Grantham, ‘Absence of Juristic Reason in the Supreme Court of Canada’ [2005] Restitution Law Review 102.

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appears to have been made for an approach based on ‘absence of juristic reason’ rather than on ‘unjust enrichment’. Significantly, the sorts of arguments I have raised here about appropriate moral starting points for thinking about unjust gains in modern liberal economies were nowhere mentioned in the single judgment delivered by Iaccobucci J. Where reasons for the choice were expressed at all, they were related to the perceived need to avoid overgenerality and subjectivity in legal rules and standards.81 The preference for the ‘absence of juristic reason’ approach was thus premised upon an express dislike of discretionary palm-tree justice.82 Citing McLachlin J, as she then was, in Peel (Regional Municipality) v Canada,83 Iaccobucci J stressed the importance of courts maintaining a proper balance between general principles of liability on the one hand, and the development of discrete, controllable categories of recovery on the other.84 The great surprise in this is not that it betrays concerns about subjectivity and generality in developing unjust enrichment reasoning, but that these dangers were considered more likely progeny of the ‘unjust factors’ system than of its more abstract, civilian rival. There is certainly no reason to think that the common law approach is less ‘objective’ than the civilian. The idea that the common law concept of unjust enrichment describes a discretionary cause of action has been widely rejected judicially,85 and even before his conversion to the civilian way of thinking, Birks took great pains to emphasise that it is essentially downward-looking and derives its meaning from existing precedents in particular categories of case.86 The problem, I suspect, is that in Canada the idea of unjust enrichment has been elevated to the status of a ‘cause of action’ and has sometimes been deployed by judges without due regard to existing legal precedent.87 Understood in this light, Iaccobucci J’s election for ‘absence of juristic reason’ can be construed as a very public way of dissociating the Supreme Court from this type of open, discretionary approach. If so, the motivation for the move is entirely laudable. In fact, however, the step was unnecessary to its proclaimed ends of objectivity and legal discipline (because the ‘unjust factors’ approach is systemically opposed to unbounded discretions), and actually likely to lead Canadian law further from them, precisely because the civilian model erects its cause of action at a higher, Ibid, [40]. Ibid. [1992] 2 SCR 762 (SCC). [2004] SCC 25, [47]. See, eg Pavey & Matthews Pty Ltd v Paul 1987) 162 CLR 221 (HCA), 256–7, per Deane J. Birks, n 1 above, 17. Perhaps the best examples of this type of indiscipline occur in the quasi-matrimonial property cases, where the generic label of unjust enrichment has often been used as a veil for discretionary exercises in property-redistribution. See, eg Sorochan v Sorochan (1986) 29 DLR (4th) 1 (SCC). On unjust enrichment as a cause of action in Canada, see G Klippert, ‘The Juridical Nature of Unjust Enrichment’ (1980) University of Toronto Law Journal 356. 81 82 83 84 85 86 87

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more abstract level. Ironically, then, the Supreme Court seems to have embraced the civilian system for precisely the reasons which tend to recommend the common law approach. Rather than rejecting the latter, it should perhaps have sought to bring greater discipline to its use, by understanding and explaining it more clearly. The reasoning in Garland does little, I suggest, to advance the civilian case. From this point of view, it is illuminating to reflect on the subtle differences in emphasis in the reasoning of the Supreme Court in the more recent Pacific National case.88 According to Ross Grantham, these smack more of the common law than the civilian approach,89 despite the Court’s formal affirmation of Garland. They could, he observes, signal an attempt at the sort of ‘reconciliation’ proposed by Birks90 between civilian and common law reasoning methods—precisely the sort of reconciliation which I have suggested above is likely to prove impossible, owing to the difficulty of coherently expressing positive reasons in a negative justificatory form.

B The United States The draft of the Third Restatement of Restitution and Unjust Enrichment91 is more cautious. Though American law also has its civilian influences through the state of Louisiana,92 their mark is less deeply etched than in Canada. This said, there are certainly some differences in the text’s language and reasoning from the first Restatement, and one of these is that the authors purposely draw a distinction between the terms ‘unjust’ and ‘unjustified’ enrichment.93 Although the term ‘unjust enrichment’ is now to be found in the title to the work, the authors significantly note that the term ‘unjustified’ enrichment is really more ‘appropriate’ because it signifies that the relevant justifications for restitutionary liability are legal ones rooted in precedent, not simply moral ones or a matter of subjective discretion.94 The language of ‘unjustified’ enrichment is said to be more ‘precise’ and to have greater ‘explanatory power’ than its rival, which has its roots in ‘natural justice’ and a broader ‘equitable’ feel.95 The tone of this is very close to that of Iaccobucci J’s judgment in Garland and is prey to precisely the same criticism I posited above. It conceives of unjust n 80 above. Grantham, n 80 above. Ibid, 107. Restatement of the Law of Restitution and Unjust Enrichment (3rd), Discussion Draft (American Law Institute, 2000). 92 See B Nicholas, ‘Unjustified Enrichment in Civil Law and Louisiana Law’ (1962) 36 Tulane Law Review 605. 93 Comment (b) to s 1. 94 Ibid. 95 Ibid. 88 89 90 91

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enrichment (and hence, presumably, unjust factors) as a potential licence for undisciplined reasoning, when this is simply not the case. In fact, the common law concept of unjust enrichment is defensibly understood as both objective (injustice deriving its meaning from established legal rules in particular categories of case) and moral (because those precise, legal rules themselves have moral foundations). If the expressed preference for the language of unjustified enrichment in the draft Third Restatement were simply an appeal for objective legal standards as opposed to open discretions, it would again be well motivated, albeit premised upon a misconception about the function of the concept of unjust enrichment in the common law. Further scrutiny of the text suggests, however, that the preference for the language of ‘unjustified’ enrichment goes beyond the idea that it has a more obvious claim to objectivity. There are overt references to the concept not simply as an objectivised (legally established) version of (morally) unjust enrichment, but as signifying the transfer of a benefit without adequate legal ground.96 An example is to be found in the following illustration, provided to help explain the relationship between unjust and unjustified enrichment under section 1:97 A, a poor widow, sells to B, a prosperous jeweler, a curious stone that they both believe to be topaz. B pays A the contract price of $1. When the stone proves unexpectedly to be a yellow diamond, B resells it for $750. On suit by A, the court finds no grounds for avoidance of the contract. Although it might be argued that equity and good conscience require B to share with A the profit on resale, there is no ‘unjust enrichment’ of B as the term is used in the law of restitution. Nor is there ‘unjustified enrichment’ as the result of the transaction, since the legal basis for B’s enrichment is a valid contract of sale.

There are some important ambiguities in this passage, but at least two things are clear. First, the results prompted by both ‘unjust enrichment’ and ‘unjustified enrichment’ are distinguished from the one which might be right morally (as a matter of ‘equity and good conscience’). If anything, this tends to undermine the implication earlier in the commentary that ‘injustice’ in unjust enrichment is a vague moral standard, not a legal one. Secondly, restitutionary recovery is denied to A in the example cited because the transfer of the stone to B took place under a valid contract of sale. The enrichment is ‘justified’, as well as being ‘just’. The key question is, does the reference to the jeweler’s profit being ‘justified’ by a ‘legal basis’ represent a true shift to the civilian way of thinking? It seems highly unlikely, for the following reasons. First, the key point that is being made is that there a good reason against restitution of the value of the diamond—the existence of a valid contractual allocation 96 97

Ibid. Ibid, Illustration 1.

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of risk. Respect for this powerful, countervailing reason against restitutionary recovery is perfectly compatible with the common law method, as we saw above. It could constitute a bar to recovery which the claimant is unable to overcome, or a reason why he is unable to demonstrate that its retention is unjust. Second, there is no attempt to elevate the ‘absence of a legal ground’ to the status of a restitutionary cause of action, as under the Birksian scheme. There is no suggestion, for example, that if the contract were indeed avoided, the absence of that contract would itself provide the reason for restitution. Thirdly, the reporter himself notes that, whatever the possible attractions of the civilian system of thinking, it could not be introduced into American law without damaging its structure.98 The implication of this is that it should not be. Fourthly, both the title and the general scheme of the Third Restatement adhere to the common law approach. Chapter 2 of the discussion draft thus proceeds to analyse transfers which are subject to avoidance in terms of traditional positive reasons for restitution, such as mistake, misrepresentation, duress, undue influence, incapacity and so on. Fifthly, the commentary makes it clear that the reference to unjustified enrichment is not intended to make any difference to the substantive outcome of a case.99 No shift in the basic moral or legal stance on questions of responsibility is therefore anticipated. Sixthly and finally, it is clear that the concept of unjust enrichment which heads the draft Third Restatement is designed to cover cases involving enrichment by wrongdoing as well as non-consensual transfers. The civilian concept of absence of legal ground is largely redundant in the former context. Indeed, profitable wrongs are expressly excluded from the ambit of the Birksian unjust enrichment scheme. It seems unlikely, then, that the draft is intended to replicate any such scheme. Whilst some reference to civilian language therefore appears in the text, it actually seems out of place, given the dominant model according to which the material of the subject is organised. The points which its authors wished to make about objectivity and precision could have been made without reference to that language and perhaps should have been, for the avoidance of confusion. Overall, the approach remains true to the traditional, common law approach.

C

England and Wales

Although there have been a number of cases in which the language of absence of consideration and absence of basis has been used in 98 99

Ibid, Reporter’s note to comment (b). Ibid.

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England,100 no definitive choice to shift to the civilian model has as yet been made. Gaps in recovery have largely been covered by expansions in the definitions of the various unjust factors, for example by expanding existing grounds of recovery to include mistakes of law.101 In its most recent relevant decision, Deutsche Morgan Grenfell v Inland Revenue Commissioners,102 the House of Lords did not consider resolution of the grand schematic issue to be necessary for disposal of the case. Overpayments of tax which were thought due at the time they were made, but which were subsequently declared by the European Court of Justice to have been unlawfully demanded, were deemed recoverable because the payer’s claim could appropriately be described as one ‘for relief from the consequences of a mistake’ within section 32 of the Limitation Act 1980. Birks’s doubts103 as to whether it is possible to discover a ‘mistake’ in such a case were not shared by their Lordships. Lord Hoffmann nonetheless indicated that he thought the result might be consistent with the idea that the payer’s mistake was one example of a more general principle of recovery based on the condictio indebiti.104 Lord Walker intimated that this was not the right time to decide whether to rebase the whole law of unjust enrichment on a highly abstract principle which (although familiar to civilians and to Scottish lawyers) . . . represents a distinct departure from established doctrine.105

He raised precisely the sorts of concern about generalisation to which I referred in Part III of this essay, acknowledging that it is of the nature of the common law to develop slowly, and attempts at dramatic simplification may turn out to have been premature and indeed mistaken.106

He did, however, call for a period of reappraisal and went on to indicate his basic attraction to the pyramidic structure of civilian-style reasoning proposed by Birks. Recognition of ‘no basis’ as a unifying principle would thus, he suggested, preserve . . . the purity of the principle on which unjust enrichment is founded, without in any way removing . . . the need for careful analysis of the content of particular ‘unjust factors’ such as mistake.107

Lords Hope, Brown and (dissenting) Scott made no reference to the civilian model at all in the course of their speeches. 100 The first of these was Westdeutsche Landesbank Girozentrale v Islington LBC [1994] 4 All ER 890, 925–30, per Hobhouse J. 101 Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (HL). 102 [2006] UKHL 49. 103 P Birks, ‘Mistakes of Law’ (2000) Current Legal Problems 205. 104 [2006] UKHL 49, [22]. 105 Ibid, [155]. 106 Ibid, [156]. 107 Ibid, [158].

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Only time will tell whether the Birksian seeds sown by Lords Hoffmann and Walker germinate in English soil. It is significant, however, that both regarded the various unjust factors such as mistake as possible subcategories of the more general ground of recovery called absence of basis. Lord Hoffmann thus clearly suggested that mistakes might be regarded as a subspecies of the condictio indebiti action, in the same way that medical negligence cases might be seen to be a subcategory of negligence cases.108 With the greatest of respect, this is mistaken for reasons explained earlier in this essay. The existence of an operative mistake is a positive justification for recovery. Absence of legal basis describes a broad negative justification. As I indicated in Part III, these two are incompatible in reasoning terms, though it may be the case that there is both a mistake and the absence of any obligation to pay on the same set of facts. Lord Hoffmann’s analogy with subcategories of negligence case is therefore misleading. Absence of legal basis is not simply a more abstract, principled supercategory encompassing the various grounds of recovery traditionally recognised by the common law. It denotes an entirely different approach to the level at which causes of action are defined in unjust enrichment cases and an entirely different justificatory orientation which is at odds with the basic approach of the common law to questions of responsibility for gain. To summarise, the obiter dicta of two of their Lordships in Deutsche Morgan Grenfell do not as yet provide anything like a firm foundation for the reconstruction of the law of unjust enrichment along the lines suggested by Birks, though we still cannot rule this development out. Whilst Canada has apparently embarked on this route, it appears to have done so for reasons which are questionable and which it may well live to regret. The United States, by contrast, acknowledges the dangers of open discretions and undefined moral standards in developing unjust enrichment law and toys with the language of the civilian approach in a bid to highlight the need for objectivity, but remains ultimately remains true to the ‘unjust factors’ approach.

V

SUMMARY AND CONCLUSIONS

It has colourfully been suggested by Thomas Krebs that English unjust enrichment law lies at a crossroads in its reasoning,109 but the metaphor of a tipping point may actually be more apposite. One who takes a wrong turn in the road might so easily reverse their direction at the next roundabout and retrace their path. By contrast, the passing of a tipping point generates fundamental changes in environmental conditions which are Ibid, [22]. T Krebs, Restitution at the Crossroads: A Comparative Study (London, Cavendish Press, 2001). 108 109

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almost impossible to reverse within a short time frame, if indeed they are reversible at all. Our judges do not have the luxury of being able to turn rapidly about face; and the shift of thinking entailed by the new Birksian model is far more profound, I suggest, than has been acknowledged by Lords Hoffmann and Walker in Deutsche Morgan Grenfell. Although Birks suggested this model as a reconciliation of the common law and civilian points of view, no coherent accommodation of the two models of reasoning is really possible, even though both may reach similar results when applied to the same set of facts. The two paths could lead to the same end-point, but that does not mean that both can coherently be trodden at the same time. Ironically, precisely this point appears to be have been made by Birks himself,110 but for reasons which remain mysterious, he did not apparently consider this proclaimed ‘incompatibility’ to preclude the proposed ‘reconciliation’. Perhaps he thought it a temporary fix, pending more profound structural alignment of the entire common law system with the civilian approach. It is hard to tell. On this and other issues, we miss his candid wisdom profoundly. The principal thrust of this essay is that the decision whether to shift to the civilian style of reasoning compellingly advocated by Birks needs to take account of our moral and legal starting points in decisions about responsibility for gain in modern, liberal societies. Unless the structure of our future reasoning is properly aligned with its basic moral foundations, it will inevitably be susceptible to cracking, and the subsequent process of shoring it up will be both unnecessarily complex and messy. Getting these foundations right is crucially important to the coherence of the future law. All the arguments we considered in Part II suggested that, in the context of the standard competitive norms pervading commercial dealings in modern economies, the gains we make require no moral or legal explanation, even where they are directly causally related to losses to others. The onus must lie on those who wish to claim them to provide a good reason for doing so, by showing not just that they are related to some harm they have suffered, but also that the way in which they have been made violates some behavioral (or possibly distributive) norm. This is precisely the premise of the common law approach and it would therefore be deeply ironic if we were to desert the latter, particularly if the differences in outcome achievable under the civilian model are as marginal as Lord Walker111 and Andrew Burrows112 have recently ventured to suggest. Part III sought to press this point home by illustrating the incoherence of using a negative justificatory structure of reasoning to overarch the positive reasons that I suggested are needed to make out a moral and legal 110 111 112

n 54 above. n 11 above. Ibid.

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case. It accused the cause of action referred to as ‘absence of basis’ of not simply obscuring these reasons, but of being logically incompatible with them. It also highlighted the dangers of overexpansion which attend its abstract, negative form and questioned the viability of the strategies that are supposed to contain it, at both a principled and a pragmatic level. The ‘unjust factors’ approach emerged from this section as cautious, but also, I believe, as logical, principled and morally rational. By contrast, the Birksian model, for all its apparent elegance, seemed blighted by a profound, formal contradiction which has not been satisfactorily resolved. Part IV concluded that, of the three jurisdictions that have recently tiptoed to the brink of the civilian approach, only Canada has as yet passed the tipping point, and for reasons which will appear deeply ironic to most common law onlookers. America seems destined to continue the common law’s tradition and England, pragmatic as ever, awaits a case in which the choice of approach is likely to make a real difference. It does so in a close European environment, where there are natural pressures to talk the same language as one’s neighbours in order to promote understanding and engage common solutions, but it has not yet allowed these pressures to compromise its natural sense of caution or its basic moral intuitions about the appropriate onus of responsibility for gain. If English law decides to step beyond the tipping point, it must brace itself for the consequences. It must be ready either to abandon its basic, liberal premises about the proper onus of responsibility for gain, or (if it remains true to these premises) accept as inevitable the types of incoherence, obscurity and complication which have been highlighted above. This is not to suggest that the path ahead will be entirely free of complication if we instead retain the ‘unjust factors’ approach. But we may be better able to face up to these complications, I suggest, if we remain true to our basic normative and methodological roots than if we sacrifice these in a bid to accelerate the pace of change. Being true to our basic conceptions and patient in the achievement of our ends will see us through the days that are to come. If there is criticism of Birks in this, it is muted by the realisation that from the point of view of our basic intuitions about moral and legal responsibility, he was right first time around. Though his final decision was modestly to call back his prior thinking for burning, that may yet prove to constitute a mistake. Everything that I have said here suggests that it is.

Part 2

The Place of Unjust Enrichment in the Private Law

5 Taxonomic Lessons for the Supreme Court of Canada TAXONOMI C LES S ONS FOR THE S UPREME COURT OF CANADA

MITCHELL McINNES * MI TCHELL MCI NNES

T

HOU G H LONG AC QU AINTED with his work, my first contact with Peter Birks came in 1995. Fresh out of graduate studies and teaching in Geelong at Deakin Law School (one of Australia’s then new law departments), I hoped to organise a conference under the banner of ‘Developments in Unjust Enrichment’. Resources were tight and, in the circumstances, the prospects were not especially bright. Nevertheless, in an audacious moment, I sent an email to Peter, asking if he might deliver the keynote address. To my delight, he responded almost immediately (at what must have been an ungodly hour in Oxford), accepting the invitation and offering a choice of five papers. With Birks on board, the remaining pieces easily fell into place. The programme quickly came together, registration soon reached capacity and Law Book Company eventually published the proceedings.1 I recognised then that Peter’s participation was an act of great kindness; I recognise now that it was very much in character. Indeed, Birks’s tremendous influence stemmed, in large part, from his willingness to support, and his ability to energise, students and colleagues. It is interesting to speculate further on Birks’s legacy. For many lawyers, of course, his name is synonymous with unjust enrichment, and his most enduring contributions may well lie in that field. Arguably, however, to focus there is to miss the forest for a few of the trees. Birks’s conception of unjust enrichment was notoriously unstable. He undoubtedly went too far when he announced in 2004 that ‘[a]lmost everything of mine now needs calling back for burning’.2 But it is true that, consistent with his view of the law as a working hypothesis, many of the specific rules that Birks favoured within unjust enrichment eventually may be tested, rejected and * 1 2

Professor of Law, University of Alberta. M McInnes (ed), Restitution: Developments in Unjust Enrichment (Sydney, LBC, 1996). P Birks, Unjust Enrichment (Oxford, Oxford University Press, 2003) xiv.

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replaced. If so, what ultimately remains may bear little resemblance to the particular model of liability found in the second edition of Unjust Enrichment.3 And yet, at a deeper level, it is quite likely that the subject will forever bear Birks’s mark. He changed not only what we think in terms of unjust enrichment, but also how we think about private law generally. Undeniably important in themselves, Birks’s specific rules of unjust enrichment arguably are even more significant as manifestations of the greater project. Beginning at a time when legal realism had degenerated into political cynicism, various strands of ‘critical studies’ were threatening to overrun legal scholarship and Commonwealth courts had begun asserting an authority to achieve ‘justice’ by means of broad discretion, Birks refreshingly championed rationality and coherence. He rejected the characterisation of the common law as a ‘heap of good learning’,4 and sought instead to distil its underlying structure and organisation. His decision to formulate a legal taxonomy, and to proceed by analogy to the science of cartography and the Linnaean classification of organisms, predictably proved controversial.5 By nature, analogies are vulnerable to attack. If the source and target concepts differ substantially in some important respect, the comparative exercise may be incapable of generating persuasive conclusions. In the present context, there undoubtedly are significant differences between the physical features of the Earth or the variations within the biological world (on the one hand) and private law (on the other hand). Most notably, the former are naturally occurring whereas the latter is artificially constructed. Birks’s analogies nevertheless are apt. The proof lies in the product. Just as Mercator’s projection enhanced marine navigation and Linnaeus’s scheme facilitated an orderly view of life, so too Birks’s scheme places legal categories within a coherent structure, reveals the essence of legal doctrines and suggests paths of principled evolution. The real problem with Birks’s taxonomy is not that its application results in error, but rather that it has not been applied with sufficient P Birks, Unjust Enrichment (Oxford, Oxford University Press, 2nd edn, 2005). T Wood, An Institute of the Law of England (1722) preface, as quoted in P Birks (ed), English Private Law, vol 1 (Oxford, Oxford University Press, 2000) xliv. 5 G Samuels, ‘Can Gaius Really be Compared to Darwin?’ (2000) 49 ICLQ 297; G Samuels ‘English Private Law: Old and New Thinking in the Taxonomy Debate’ (2004) 24 Oxford Journal of Legal Studies 335; G Samuels, ‘Can the Common Law be Mapped?’ (2005) 55 University of Toronto Law Journal 271; D Campbell, ‘Classification and Crisis in the Common Law’ (1999) 26 Journal of Legal Studies 369; S Hedley, ‘Rival Taxonomies Within Obligations: Is There a Problem?’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Thomson, 2005) 77; S Hedley, ‘The Taxonomic Approach to Restitution’ in A Hudson (ed), New Perspectives on Property Law, Obligations and Restitution (London, Cavendish, 2004) 151. Contrast E Descheemaeker, ‘Mapping the Common Law: On a Recent English Attempt and its Links with Scottish Jurisprudence’ [2003] Juridical Review 295; H Dagan, ‘Legal Realism and the Taxonomy of Private Law’, Tel Aviv University Legal Working Paper Series, Paper 38 (2006), available online at http://law.bepress.com/taulwps/fp/art38 (preferring a ‘realist taxonomy’ to Birks’s ‘doctrinal taxonomy’). 3 4

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frequency and vigour. Birks directly addressed the issue in several papers,6 and virtually all of his work bears a taxonomic stamp. Moreover, his model allowed a number of other scholars to cast new light on longstanding doctrines,7 some of which already have won judicial acceptance.8 For the most part, however, Birks’s taxonomy remains primarily a tool of academic analysis. Judges have been slow to accept its wisdom and occasionally have questioned the value of such inquiries.9 A more robust attitude is required. The purpose of this paper is to demonstrate the value of taxonomy against the backdrop of the Supreme Court of Canada. The discussion opens with an overview of Birks’s taxonomy of private law: the scheme’s general structure, the errors likely to arise in its absence and the benefits that can be derived from its application. The second part of the paper explains how the Supreme Court of Canada’s jurisprudence has failed for want of taxonomy. A special focus is placed upon (i) the intersection between unjust enrichment and constructive trusts; and (ii) the alignment of causes of action and measures of relief.

I

B I R K S ’ S TAX O N O M Y

By nature and history, the common law tends to be untidy. It is not based on any overarching plan. The system is inductive, rather than deductive. Rules are drawn up from cases, rather than down from principles. Evolution occurs, on the basis of experience and in response to need, incrementally and by analogy to existing rules. The historical division between law and equity exacerbates the mess. Within the general heap lie 6 See especially P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 University of Western Australia Law Review 1; P Birks, ‘This Heap of Good Learning: The Jurist in the Common Law Tradition’ in B Markesinis (ed), Law Making, Law Finding and Law Shaping: The Diverse Influences (Oxford, Oxford University Press, 1997) 113; P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon, 1997) 1; P Birks, ‘Rights, Wrongs, and Remedies’ (2000) 20 Oxford Journal of Legal Studies 1. 7 C Mitchell, The Law of Subrogation (Oxford, Clarendon, 1994); L Smith, The Law of Tracing (Oxford, Clarendon, 1997); R Chambers, Resulting Trusts (Oxford, Clarendon, 1997); J Edelman, Gain-Based Damages: Contract, Tort, Equity and Intellectual Property (Oxford, Hart Publishing, 2002); S Degeling, Restitutionary Rights to Share in Damages: Carers Claims (Cambridge, Cambridge University Press, 2003). See generally A Beever and C Rickett, ‘Interpretive Legal Theory and the Academic Lawyer’ (2005) 68 MLR 320. 8 Boscawen v Bajwa [1996] 1 WLR 328, 334 (CA) (discussing Smith’s analysis of tracing); Foskett v McKeown [2001] 1 AC 102, 128–9 (HL) (discussing Smith’s analysis of tracing); Air Jamaica v Charlton [1999] 1 WLR 1399, 1412 (PC) (discussing Chambers’ analysis of resulting trusts); Twinsectra v Yardley [2002] 2 AC 164, 189–93 (HL) (discussing Chambers’ analysis of resulting trusts); Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221, 228 (HL) (discussing Mitchell’s analysis of subrogation). 9 Lord Millett, ‘The Law of Restitution: Taking Stock’ (1999) 14 Amicus Curiae 4; cf Deutsche Morgan Grenfell Group plc v IRC [2006] 3 WLR 781, 797, 832 (HL); Attorney General v Blake [2001] 1 AC 268, 290 (HL).

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two smaller piles, one of which supposedly turns on amorphous notions of equity and conscience. The situation was always problematic for anyone who cared to see, but the response historically tended to be symptomatic of the disease. Consistent with the traditional English self-portrait, judges preferred simply to ‘muddle through’ and cope with crises as they arose. That remains true to a considerable degree. Somewhat surprisingly, given the contrast typically drawn today between common law and civilian systems, Roman law initially suffered the same defects. Its organisation consisted, not very helpfully, of the Praetor’s Edict, which merely listed and illustrated the existing actions and defences.10 The situation did not improve until the second century, when Gaius drafted his Institutes. Gaius’s genius was organisational. The great mass of Roman law was reduced to orderly divisions. Immediately it became possible to locate a given topic within a larger scheme.11 Law is either public or private. Private law splits into persons, things and actions. Each of those categories is divided in turn. Things consist of property and obligations (and, somewhat awkwardly, succession). Obligations reduce into contractu and delictu (and, as Justinian’s commissioners added in the early sixth century, ex contractu and ex delictu). And so on. Peter Birks was an expert in Roman law. He studied the subject at Oxford and London, and served as Professor of Civil Law at Edinburgh and Regius Professor at Oxford. While perhaps less widely read than his papers on unjust enrichment, his publications on Roman law nevertheless were prodigious. In seeking a solution to the messiness of the common law, it therefore was natural that he looked to Gaius (an intellectual debt that he was proud to acknowledge).12 The resulting scheme (somewhat simplified) runs as follows: 1. Law is divided into public law and private law. 2. Private law, which is concerned with the rights that one person can realise against another, is subdivided into three parts: 2.1 The law of persons pertains to the people who hold rights. 2.2 The law of rights pertains to the rights themselves. 2.3 The law of actions pertains to the realisation of those rights.

P Birks, ‘Introduction’ in Birks, English Private Law, vol 1, n 4 above, xliv. P Birks and G McLeod, Justinian’s Institutes (Ithaca, NY, Cornell University Press, 1987); B Nicholas, An Introduction to Roman Law (Oxford, Clarendon Press, 1962). 12 Birks similarly saw his taxonomy in the tradition of Blackstone’s Commentaries on the Laws of England. The shared frame of reference is evidenced by Blackstone’s belief that ‘[A]n academical expounder of the laws . . . should consider his course as a general map of the law, marking out the shape of the country, its connections and boundaries, its greater divisions and principal cities: it is not his business to describe minutely the subordinate limits, or to fix the longitude and latitude of every conceivable hamlet’: W Blackstone, Commentaries on the Law of England (London, Cavendish, 2001) para 34. 10 11

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3. Each of those categories is subdivided. Most significantly, the law of rights is broken into smaller units by asking how rights come into existence. Birks’s answer posits a relationship between causative events and legal responses. A causative event consists of a recognised pattern of empirical facts. A legal response consists of the rights that the legal system creates in reaction to such facts. There are four species of causative events. 3.1 Consent consists of the exercise of free will by either a single person (for example, a settlor’s intention to create an express trust) or several people acting together (for example, the agreement of contractual parties to create an enforceable bargain). 3.2 The commission of a wrong consists of the breach of a private law duty, be it legal (for example, breach of contract), equitable (for example, breach of fiduciary duty) or statutory (for example, occupiers’ liability). 3.3 Unjust enrichment is unusual insofar as it consists of a single entity—the events comprising the cause of action that requires proof of a reversible transfer of wealth between the parties.13 Unjust enrichment differs from the previous categories because it neither responds to the parties’ positive intentions nor presumes the breach of an obligation. It stands outside the following category because, though long denied independent recognition,14 it has been extracted from the miscellany of private law and given a nominate status.15 3.4 Because it covers the whole of human relations, the common law must recognise a wide variety of causative events. Many, if not most, of those events fall within the nominate categories. Some, however, resist categorisation. Birks’s scheme therefore necessarily accommodates miscellaneous other events that trigger responses in private law (for example, maritime salvage). Of course, it remains possible for new nominate categories to be mined from that mass in the future. 4. It would be very difficult to classify all of the legal responses that are available in the common law. The exercise would be complicated by the fact

13 Many, including Birks, previously used the same phrase ambiguously to refer to either (i) a reversible transfer of wealth between the parties or (ii) a situation in which the claimant, having suffered the violation of a right at the hands of the defendant, seeks relief measured by his gain (‘restitution’ or, preferably, ‘disgorgement’) rather than her loss (‘compensation’). The second usage generally has been abandoned following Birks’s recantation: P Birks, ‘Misnomer’ in W Cornish et al (eds), Restitution: Past, Present & Future (Oxford, Hart Publishing, 1998) 1. 14 Sinclair v Brougham [1914] AC 398 (HL). 15 Deglman v Guaranty Trust Co [1954] SCR 725 (SCC); Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221 (HCA); Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL); National Bank of New Zealand Ltd v Waitaki Intl Processing (NI )Ltd [1999] 2 NZLR 211 (NZCA).

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This scheme, considerably simplified, can be represented as a diagram (Figure 1). Note that, since the scheme is intended, in the first instance, to identify possibilities, it contains entries that may have no content in practice.

Birks, ‘Rights, Wrongs, and Remedies’, n 6 above. P Birks, ‘Before We Begin: Five Keys to Land Law’ in S Bright and J Dewar (eds), Land Law: Themes and Perspectives (Oxford, Oxford University Press, 1998) 473. 16 17

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Fig 1

A

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Birks’s Taxonomy of Private Law

The Need for Taxonomy

The great failing of legal education lies in the lack of structural overview. There are many explanations. It is difficult for any given teacher to master enough of private law so as to fully understand, let alone devise, a map of the whole. Academic freedom and diversity of opinion make it difficult for a faculty as a whole to agree upon the need for, let alone the selection of, a map of the legal landscape. The general trend is away from compulsory enrolment in foundational courses and toward electives in increasingly discrete specialties. And so on. Whatever the reason, the lack of taxonomy comes at a high price for students, lawyers, courts and ultimately society. Subjects are learned in

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isolation. Some are defined by legal categories (for example, torts and criminal law); others by social context (for example, family law and environmental law). Given the modular approach, however, many inevitably are ignored altogether. Some omissions leave enormous gaps (for example, in Canada, the law of trusts seldom is required and the law of unjust enrichment seldom is available); others are more insidious (for example, despite its profound and growing importance, the law of tracing habitually is passed over as either ‘better addressed in another course’ or ‘too difficult to teach and best left to practice’). Acquired in law school, habits of thought and modes of analysis carry over into the profession. Hectic lives at bar and bench leave insufficient time for continuing education and afford few opportunities for contemplating private law en masse. Facts received from clients or counsel are sorted into the most readily apparent claims, rather than into the most appropriate ones. Possibilities ignored in law school and neglected in practice may be overlooked entirely. Alternatively, although the common law has come to occupy substantially all its potential province, ostensible gaps may put pressure on the rules that are recognised. Doctrines may be distorted and pressed unnaturally into service, while better prospects are left unexplored. Similarly, unless concepts are held firmly in place by an organising structure, they may be misapplied. Responses suitable to one event may be triggered by another. Most worrying of all, the perceived lack of a coherent scheme, and the consequent indifference to the principled development of the law, tend to engender a belief that rights and obligations ought to be determined intuitively or by means of a broad discretion. Undoubtedly influenced by the introduction of the Charter of Rights and Freedoms in 1982,18 Canadian judges in particular have come to behave in a manner disturbingly reminiscent of Selden’s Chancellor.

B

The Benefits of Taxonomy

The preceding deficiencies are illustrated in the section that follows. First, however, it will be helpful to enumerate some of the benefits that are associated with legal taxonomy. 18 The Charter was created to regulate relations between individuals and the state. The Supreme Court of Canada nevertheless has held that, even within private law, rights and obligations ought to be interpreted and formulated in a manner that is consistent with the Charter’s values. The precise meaning of that proposition remains unclear: RWDSU, Local 580 v Dolphin Delivery Ltd [1986] 2 SCR 573 (SCC); Dobson v Dobson (1999) 174 DLR (4th) 1 (SCC). Regardless of the official position, however, it seems safe to assume that Canadian judges, having grown accustomed to analysing public law disputes through the lens of values developed under the Charter’s open-ended provisions, approach private law claims in much the same frame of mind.

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Accessibility

Private law covers enormous territory, much of it dense and initially impenetrable. Given the trend towards specialisation, even experienced counsel may feel uncomfortable outside their areas of expertise. The student or layperson is apt to be entirely overwhelmed. Birks had precisely that problem in mind when he oversaw production of English Private Law. The two volume set was designed to ‘reveal the structure of the trees beneath the leaves’.19 Practitioners, he hoped, would use it as a first port of call, a means by which to situate files within relevant bodies of law and obtain guidance to more detailed resources. With an eye toward globalisation and integration, he also hoped that ‘lawyers abroad, in the Commonwealth and in Europe’ would regard it as a ‘trouble-free and speedy means of finding out the basic English position in areas of importance’.20 The taxonomic goal is not to present specific issues in high relief, but rather to demonstrate how the various components comprise the whole. (ii) Similarities and Differences Under the doctrine of stare decisis, the ability to recognise similarity and difference is chief among lawyerly skills. Seldom does a case arise as a matter of first impression; most disputes are guided, if not governed, by precedent. The difficulty, of course, is that no two cases are identical. The lawyer therefore must be able to identify, often amongst seemingly disparate authorities, which one most closely resembles the facts at hand for relevant purposes. That exercise is complicated by the fact that, by reason of historical accident, precedents bearing upon a single issue often appear under a variety of labels. The first edition of Goff and Jones21 was a landmark in private law scholarship, for instance, because its authors, following an exhaustive trawl of the case reports, brought together decisions that had been scattered beneath innumerable headings (for example, money had and received, rescission, constructive trust). The jurisdictional division between law and equity adds to the challenge. A single issue may be addressed by both courts, albeit in language that obscures the underlying similarity. Birks’s taxonomy helps to overcome those difficulties. By reducing legal phenomena to a small list of causative events (that is, consent, wrongs, unjust enrichment and others) and associated responses, that taxonomy requires precedents to be understood in substance, rather than merely by form. Regardless of the terminology initially used, the gist of each 19 20 21

P Birks, ‘Preface’ in Birks, English Private Law, vol 1, n 4 above, xxx. Ibid. R Goff and G Jones, The Law of Restitution (London, Sweet & Maxwell, 1966).

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authority must consist of the expression of free will, the breach of a civil obligation, a transfer that is reversible without fault or some miscellaneously recognised event. Likewise, while Birks never attempted a similarly exhaustive list, legal responses should be classified according to their core functions. Is the purpose22 of a court’s order to repair the claimant’s loss (compensation)? Or to strip a wrongful gain (disgorgement)? Or to reverse a transfer between the parties (restitution)? Or symbolically to vindicate a right (nominal damages or declaration)? Or to punish and deter (punitive damages)? Moreover, is the order exigible against the defendant only (personal relief)? Or do the plaintiff’s rights attach to a particular asset (proprietary relief)? The possibilities are limited and manageable. The value of that exercise can be illustrated by the evolving relationship between unjust enrichment and resulting trusts. Traditionally, of course, those two doctrines were considered distinct and unrelated. With the benefit of taxonomy, however, Birks was able to see past the jurisdictional difference (that is, unjust enrichment generally arises in law, whereas the resulting trust inevitably is equitable) and its terminological consequences, and to demonstrate that every instance of resulting trust has, in substance, been proprietary restitution for unjust enrichment.23 Unfortunately, that revelation, as further expounded by Chambers,24 came too late to win the opening battle in the House of Lords.25 Moreover, even while accepting the truth of the basic proposition (that is, that resulting trusts invariably are triggered by unjust enrichment), many lawyers are reluctant to follow the point through to its logical conclusions (for example, that, regardless of precedent, proprietary restitution should be available whenever the defendant retains the traceable proceeds of a transfer that he was not intended to enjoy beneficially). Nevertheless, judicial support is growing26 and, for the first time in history, the debate has been properly framed.

22 Contrary to his usual insistence upon analytical rigour, Birks was content to classify remedies by effect, rather than purpose, when he referred to both giving back (restitution) and giving up (disgorgement) under the single label of ‘restitution’: P Birks, ‘Unjust Enrichment and Wrongful Enrichment’ (2001) 79 Texas Law Review 1767. As a result, some of his writing is uncharacteristically ambiguous and prone to misinterpretation: M McInnes, ‘Misnomer: A Classic’ [2004] Restitution Law Review 79. 23 P Birks, ‘Restitution and Resulting Trusts’ in S Goldstein (ed), Equity and Contemporary Legal Developments (Jerusalem, Sacher Institute for Legislative Research and Comparative Law, 1992) 335. 24 Chambers, n 7 above. 25 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL). 26 Air Jamaica v Charlton [1999] 1 WLR 1399, 1412 (PC); Twinsectra v Yardley [2002] 2 AC 164, 189–93 (HL).

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(iii) Anomalies and Gaps The common law need not form a seamless web and it occasionally may prefer policy over coherence.27 Most of the gaps and anomalies that exist within private law nevertheless exist by oversight and error, rather than by design. By providing a framework for analysis, Birks’s taxonomy helps to identify and eradicate such problems. The category of unjust enrichment is illustrative. Once the relevant authorities are collected from various sources and organised under that banner, it becomes clear that various instances of restitutionary recovery are characterised by strict liability.28 Indeed, unjust enrichment is distinguishable from wrongs precisely because it does not presume that the defendant breached an obligation. Against that backdrop, any case in which a court requires a restitutionary claimant to establish fault stands out as contrary to the general run of authority. It therefore must be specially justified or overruled.29 A second illustration involves the availability of gain-based relief. As Birks memorably explained, a person whose private rights have been infringed ‘may show that from this one wrong there hang two remedial strings, one compensatory, the other restitutionary [ie disgorgement]’.30 Until Birks’s taxonomy led him to address that proposition, however, the issue of gain based relief for wrongdoing had received little sustained attention. It was regarded, under disparate labels (for example, account of profits, waiver of tort, money had and received), as a peripheral issue, primarily of interest to the Chancellor. Going further, courts expressly rejected claims aimed at profits earned through breach of contract.31 All of that has changed, thanks in large part to Birks’s insight. Having been shown that disgorgement is far more common than traditionally thought, courts are now prepared openly to acknowledge the possibility32 and occasionally to extend relief to new situations. The House of Lords’ 27 For example, for fear of intolerably restricting a woman’s freedom of choice, the Supreme Court of Canada controversially decided that while a child generally may sue with respect to injuries suffered prior to birth, no action lies against a mother for careless acts during pregnancy: Dobson v Dobson (1999) 174 DLR (4th) 1 (SCC). 28 Liability in unjust enrichment is ‘strict’ in the sense that it does not presume breach. That species of strict liability must be distinguished from the sort of ‘strict liability’ that applies when a form of wrongdoing may be committed unintentionally and without carelessness (eg breach of contract, trespass to land, breach of fiduciary duty). 29 P Birks, ‘Undue Influence as Wrongful Exploitation’ (2004) 120 LQR 34 (arguing that undue influence must turn on impaired intention, rather than exploited vulnerability). 30 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon, revised edn, 1989) 316. 31 Tito v Waddell [1977] 106 Ch 332 (HC). 32 Ministry of Defence v Ashman [1993] 2 EGLR 102, 105 (CA) (‘It is true that in the earlier cases it has not been expressly stated that a claim for mesne profit for trespass can be a claim for restitution. Nowadays I do not see why we should not call a spade a spade’: per Hoffmann LJ); contrast M McInnes, ‘Gain, Loss and the User Principle’ [2006] Restitution Law Review 76 (arguing that many purported authorities actually involve compensation for loss).

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decision to strip George Blake of his tainted profit33 is merely the most notorious example. A contentious third illustration concerns punitive damages for equitable wrongdoing. Because Birks’s scheme reflects causative events, rather than jurisdictional ancestry, it does not contain a separate category for facts traditionally arising under the Chancellor’s authority. Such items instead are redistributed within the generalised categories. The unilateral intention that triggers an express trust falls under the rubric of consent, alongside the bilateral intention that results in a contract. The action for knowing receipt of trust property (somewhat uncomfortably34) joins the claim for the recovery of a mistaken payment at law beneath the banner of unjust enrichment. And, most significantly for present purposes, the various species of equitable wrongdoing (for example, breach of fiduciary duty and dishonest assistance) bear the label of wrongs, along with torts, breach of contract and breach of statutory duties. That classification reveals the anomaly of awarding punitive damages for some legal wrongs, while denying the possibility for all forms of equitable breach. While a particular wrong may by nature preclude such relief, it is difficult to understand why, by mere dint of pedigree, every equitable wrong resists punishment and deterrence.35 There may be a genuine debate as to whether punitive damages are ever appropriate within private law. But once that question is answered in the affirmative, it seems preferable to follow the Supreme Court of Canada36 over the New South Wales Court of Appeal37 by extending the option to wrongs from both sides of the jurisdictional divide.38 33 Attorney General v Blake [2001] 1 AC 268 (HL); cf Bank of America Canada v Mutual Trust Co [2002] 2 SCR 601, 612 (SCC). 34 Although the Supreme Court of Canada has accepted Birks’s view of knowing receipt as an equitable species of unjust enrichment (Citadel General Assurance Co v Lloyds Bank Canada [1997] 3 SCR 805), courts elsewhere in the Commonwealth are reluctant to agree: Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2000] 4 All ER 221 (CA); Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 (HL); Criterion Properties plc v Stratford UK Properties LLC [2004] 1 WLR 1846 (HL); contrast Lord Nicholls, ‘Knowing Receipt: The Need for a New Landmark’ in W Cornish et al (eds), Restitution: Past, Present & Future (Oxford, Hart Publishing, 1998) 231. Unfortunately, work remains to be done in Canada as well. Despite classifying knowing receipt as unjust enrichment based, La Forest J expressly rejected Birks’s call for strict liability. Aside from being contrary to recent precedent (Air Canada v Liquor Control Board of Ontario [1997] 2 SCR 581), Citadel Assurance mistook strict liability for absolute liability and overlooked the protection that recipients receive through restitutionary defences (especially change of position and bona fide purchase): M McInnes, ‘Knowing Receipt and the Protection of Trust Property’ (2002) 81 Canadian Bar Review 171. 35 Indeed, fiduciary obligations are designed pour encourager les autres. In resolving a claim for breach of fiduciary duty, equity generally looks not only to the immediate parties, but also to the deterrence of potential wrongdoers in the future. 36 Norberg v Wynrib [1992] 2 SCR 226 (SCC); M(K) v M(H) [1992] 3 SCR 6 (SCC); Huff v Price (1990) 51 BCLR (2d) 282 (BCCA). 37 Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 (NSWCA). 38 A Burrows, ‘Remedial Coherence and Punitive Damages in Equity’ in Degeling and Edelman, n 5 above, 381; A Duggan, ‘Exemplary Damages in Equity: A Law and Economics Perspective’ (2006) 26 Oxford Journal of Legal Studies 303.

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Alignment of Events and Responses

At the same time that it opens new avenues of relief, Birks’s taxonomy also helps to eliminate responses that ought not to exist. The diagram presented earlier drew attention to the need to consider the entire run of responses in connection with each category of causative event. That is not to say, however, that all responses are appropriate for all events (even if, for the sake of discussion, events are limited to causes of action and responses are confined to remedies). The logic or rationale of an event may demand the availability of one response or preclude another. As a matter of principle, egregious wrongdoing raises the prospect of punitive damages in a way that the innocent receipt of a mistaken payment does not. Because they invariably look forward, enforceable promises naturally support expectation damages in a way that backward-looking events, like negligence, do not. And so on. Accordingly, once it accommodates such refinements, Birks’s scheme demonstrates the remedial range of each event. Birks’s belief that underlying events control the range of legal responses is revisited later in this essay. Suffice it to say for now that it stands in direct contrast to a growing trend, particularly pronounced in Canada, toward a ‘basket of remedies’ approach to litigation. That model allows a judge, once satisfied on the threshold issue of liability, to exercise a broad discretion in determining the most effective means of achieving justice. (v)

The Rule of Law and Multiculturalism

Problematic in itself, a broadly discretionary approach to remedies points to an even more fundamental issue. The trend toward judicial flexibility in the pursuit of justice coincides with growing concern for multiculturalism. The combined effect is deeply troubling. Although it is a criminal case, RDS v The Queen39 usefully goes to the heart of the matter. A black teenager was charged with a variety of crimes after scuffling with a white police officer. The officer and the accused, who were the only witnesses to the relevant events, told mutually incompatible stories. The matter came before Sparks J, Canada’s first female black judge, who accepted the accused’s story and accordingly acquitted. By way of explanation, she said:40 I’m not saying that the constable has misled the Court, although police officers have been known to do that in the past. And I’m not saying that the officer overreacted, but certainly police officers do overreact, particularly when they’re dealing with non-white groups. That, to me, indicates a state of mind right there that is questionable. 39 40

[1997] 3 SCR 484 (SCC). [1994] NSJ No 629 (Fam Ct).

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The Crown appealed on the ground that Sparks J’s decision was tainted by a reasonable apprehension of bias. While the intermediate courts agreed, the Supreme Court of Canada reinstated the acquittal. Indeed, L’Heureux-Dubé and McLachlin JJ found Sparks J’s comments to be not only unobjectionable, but commendable. Far from improperly suggesting that white police officers routinely lie when dealing with black youths, they found that the Sparks J had appropriately viewed the facts through the lens of her experiences as a member of a visible minority:41 [J]udges in a bilingual, multiracial and multicultural society will undoubtedly approach the task of judging from their varied perspectives. They will certainly have been shaped by, and have gained insight from, their different experiences, and cannot be expected to divorce themselves from these experiences on the occasion of their appointment to the bench. In fact, such a transformation would deny society the benefit of the valuable knowledge gained by the judiciary while they were members of the Bar. As well, it would preclude the achievement of a diversity of backgrounds in the judiciary . . . As a member of the community, it was open to [Sparks J] to take into account the well-known presence of racism in that community and to evaluate the evidence as to what occurred against that background.

The legal system often is personified in the form of Justitia, the Roman goddess of justice, who appears blindfolded, scales in one hand and sword in the other. Interestingly, however, the version that stands guard outside of the Supreme Court of Canada wears no blindfold. The sculptor, Walter Allward, seems to have been prescient, for RDS is a celebration of the politics of identity. The accused benefited, and perhaps was acquitted, because he came before a judge with whom he shared a common experience. Of course, with a different roll of the dice, he might have appeared before a judge whose personal experiences engendered suspicion of disadvantaged and disaffected young men. It is difficult to imagine that any Canadian court would countenance reliance upon that sort of experience, but as a matter of integrity, there is no rational basis for encouraging some ‘insights’ while denying the validity of other ‘perspectives’. The effects of RDS are most obvious on a case-by-case basis. Presented with a dispute that turns on conflicting testimony, a judge naturally inclines toward a party with whom she deeply empathises. Required to assess the credibility of a witness with whom he feels no connection, a judge unsurprisingly arrives at an unfavourable conclusion. Far more harmful, however, are the long-term consequences. A disappointed litigant should never be left genuinely to wonder if the case would have been won if he had enjoyed greater kinship with the judge. A community should 41

[1997] 3 SCR 484, 505–506, 511–12 (SCC).

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never have reason to believe that its courthouse operates on the basis of crude personal politics. The irony, then, is that, as society grows ever more pluralistic, the judiciary must increasingly strive for neutrality and the appearance of impartiality. Within substantially homogeneous communities, it may have been possible in the past to assume shared values and perspectives (though even within societies united by race, other divisions, such as class, appear inevitable). Today, however, it is imperative that, to the greatest possible extent, reasons for judgment be plain and demonstrable. A judge invariably should be able to say: ‘Look here. I didn’t resolve this dispute—these rules did.’ Granted, the prevailing view (at least in North America) is that ‘we are all realists now’, and it may be that objectivity is never entirely achievable. That is all the more reason, however, for private law to be conceived along the lines that Birks suggested. Taxonomy organises the legitimate tools of dispute resolution in such a way as both to facilitate the judicial function and to render the reasons for judgment transparent to the public. Birks’s scheme safeguards the rule of law by increasing the likelihood that the appropriate rules will be identified and applied clearly and consistently.

II

D I F F I C U LT I E S I N T H E S U P R E M E C O U RT O F CA N A DA

Law is subject to all of the frailties of thought: inattentiveness, misperception, forgetfulness and error. Although examples could be drawn from a variety of sources, the focus here falls on the Supreme Court of Canada. That court has, for instance, fallen into the deeply disturbing habit of issuing conflicting judgments in short succession. Sometimes the changes are explicit and deliberate.42 Sometimes, less defensibly, a majority position is lost through the vagaries of panel composition.43 And all too often there is no explanation at all. There are plenty of examples of such contradictions, even if the discussion is confined to recent developments in unjust enrichment. Although it occasionally recognises that that claim normally is a creature of law, the Court habitually refers to it as an equitable action that ‘necessarily involve[s] discretion and questions of fairness’.44 Despite writing the 42 Compare Ratych v Bloomer [1990] 1 SCR 940 (SCC) and Cunningham v Wheeler[1994] 1 SCR 359 (SCC) (whether collateral benefits are deductible from tort damages); compare also McInerney v MacDonald (1992) 93 DLR (4th) 415 (SCC) and KLB v British Columbia [2003] 2 SCR 403 (SCC) (whether fiduciary duties are prescriptive or proscriptive). 43 Compare Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574 (SCC) and Hodgkinson v Simms [1994] 3 SCR 377 (SCC) (whether special vulnerability is a prerequisite to fiduciary duty). 44 Compare Communities Economic Development Fund v Canadian Pickles Corp [1991] 3 SCR 388 (SCC) and Garland v Consumers’ Gas Co [2004] 1 SCR 629, 650 (SCC). See also

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leading Commonwealth authority in favour of the defence of passing on, the Court very recently held that such a plea is ‘contrary to the basic principles of restitution law’ and unworkable in practice.45 After formulating an elaborate scheme to immunise governments against claims for the recovery of money paid pursuant to unconstitutional demands, the Court first doubted the wisdom of its ways and then explicitly recanted.46 A mere seven months after replacing unjust factors with juristic reasons, and thereby effecting the most profound shift imaginable within the law of unjust enrichment,47 a virtually identical panel inexplicably suggested that the existence of a mistake (the paradigm unjust factor) may be determinative of the right to restitution.48 And a mere four months after correctly finding that liability in unjust enrichment arises from the claimant’s impaired intention and without regard to the defendant’s knowledge, essentially the same panel ignored its earlier decision and required proof that the recipient should have known that the payment was unjustified.49 The list goes on.50 Those illustrations cannot be dismissed as peripheral or contentious matters of interpretation. They manifestly go to the core of unjust enrichment. And for that reason, they are very difficult to comprehend. How do such lapses occur? Part of the explanation undoubtedly lies in the Court’s tremendous workload. It may be that judgments occasionally are written without the benefit of exhaustive research, and that concurring members sometimes sign on without having had sufficient time to study fully the circulated drafts. The Court’s clerks (27 in number, typically fresh out of law school and hired on one-year terms) may lighten the burden, but to the extent that they influence the Court’s R Grantham, ‘The Equitable Basis of the Law of Restitution’ in Degeling and Edelman, n 5 above, 349; M McInnes, ‘The Equitable Action in Unjust Enrichment: Ambiguity and Error’ (2007) 45 Can Bus Law Journal 253. 45 Air Canada v British Columbia [1989] 1 SCR 1161 (SCC); cf Kingstreet Investments Ltd v New Brunswick [2007] 1 SCR 3 (SCC). 46 Air Canada v British Columbia [1989] 1 SCR 1161; cf Re Eurig Estate [1998] 2 SCR 565 (SCC); Kingstreet Investments Ltd v New Brunswick [2007] 1 SCR 3 (SCC). 47 A shift, incidentally, which Birks independently embraced: Birks, n 3 above. Whether or not that shift is desirable, the Supreme Court of Canada’s position is problematic: M McInnes, ‘Making Sense of Juristic Reasons: Unjust Enrichment After Garland v Consumers’ Gas Co’ (2004) 42 Alberta Law Review 399. 48 Garland v Consumers’ Gas Co [2004] 1 SCR 629, 650 (SCC); cf Pacific National Investments Ltd v Victoria (City) (No 2) [2004] 3 SCR 575, 592 (SCC). See also M McInnes, ‘The Test of Unjust Enrichment in Canada’ (2007) 122 LQR 33. 49 Air Canada v Liquor Control Board of Ontario [1997] 2 SCR 581 (SCC); cf Citadel General Assurance Co v Lloyds Bank Canada [1997] 3 SCR 805 (SCC). 50 Compare, eg New Solutions Financial Corp v Transport North American Express Inc [2004] 1 SCR 249 (SCC) and Garland v Consumers’ Gas Co [2004] 1 SCR 629, 650 (SCC) (substantially inconsistent decisions regarding treatment of contractual parties criminally demanding payment of illegal rate of interest). See also J Swan, Canadian Contract Law (Toronto, Butterworths, 2006) 788–9.

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decisions,51 they understandably lack experience and often have no recollection of opinions rendered only months earlier. So, too, judges may rely upon facta that, by accident or design, are incomplete or misleading. Whatever the explanation for the defects occasionally affecting its decisions, the Supreme Court of Canada undoubtedly would benefit from greater attention to taxonomy. Birks’s goals of rationality, coherence and consistency will never perfectly be realised. Nevertheless, there certainly is room for improvement, as the following extended illustrations demonstrate.

A

Unjust Enrichment and Constructive Trusts

The Supreme Court of Canada continues to struggle with the constructive trust. Ironically, much of the problem lies in the Court’s repeated attempts at taxonomic elegance. The constructive trust is inherently messy, a grab bag of miscellaneous equitable doctrines. It applies across a broad range of circumstances and for a variety of reasons. As Waters recognised 40 years ago, There was never a theme behind the use of the constructive trust by Chancery. It was never more than a medium through which for the Chancery mind the obligations of the parties might be expressed or determined.52

That is not to say that the doctrine is immune to categorisation. On the contrary, as Chambers has demonstrated53 by analysing Elias’s pioneering work54 within Birks’s taxonomy, (almost55) all constructive trusts fall into three (or possibly two) groups: • Wrongs: Equity (imperfectly56) subscribes to the belief that no man should profit from his own wrongdoing. It therefore sometimes compels 51 While no one has drawn the sort of scandalous picture sometimes published south of the border (B Woodward and S Armstrong, The Brethren (New York, Simon & Schuster, 1979); E Lazarus, Closed Chambers (New York, Random House, 1998)), the functions performed by the Canadian clerks do afford some scope for influence: L Sossin, ‘The Sounds of Silence: Law Clerks, Policy-Making and the Supreme Court of Canada’ (1996) 30 UBC Law Review 279; M McInnes et al, ‘Clerking at the Supreme Court of Canada’ (1995) 33 Alberta Law Review 58. 52 D Waters, The Constructive Trust (London, Athlone Press, 1964) 39. 53 R Chambers, ‘Constructive Trusts in Canada’ (1999) 37 Alberta Law Review 173, reprinted in (2001) 15 Trust L Int 214 and (2002) 16 Trust L Int 2. 54 G Elias, Constructive Trusts (Oxford, Clarendon, 1990). 55 Just as Birks’s list of causative events includes a miscellaneous category, so too constructive trusts may arise sui generis and outside of the nominate groups: Lonrho plc v Fayed (No 2) [1992] 1 WLR 1, 9 (CA). 56 Attorney General v Guardian Newspapers (No 2) [1990] 1 AC 109, 286 (HL) (‘The statement that a man shall not be allowed to profit from his own wrong is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case’: per Lord Goff).

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proprietary disgorgement of wrongful enrichments by impressing a constructive trust onto ill-gotten gains in the defendant’s hands.57 • Perfection: Equity places a premium on personal autonomy and desires fulfilment of seriously stated intentions, especially in cases of detrimental reliance. It therefore often imposes constructive trusts for perfectionary purposes. Though controversial, the concept of perfection provides the best explanation for the trusts that arise in connection with specifically performable contracts of sale,58 oral trusts of land,59 incomplete gifts,60 proprietary estoppel,61 the ‘Pallant v Morgan equity’,62 secret trusts,63 mutual wills64 and (in Canada) the division of cohabitational property.65 • Unjust Enrichment: Finally, equity not only subscribes to the principle of unjust enrichment, but also recognises that in some circumstances,66 restitution ought to be effected in specie. It therefore occasionally awards a constructive trust in order to effect proprietary restitution.67 The final category is contentious. The trust that provides proprietary restitution for unjust enrichment should not be considered constructive. As Birks and Chambers have demonstrated,68 the traditional resulting trusts (that is, those arising from gratuitous transfers and failures of express trusts) arise where property is transferred without an intention to confer a benefit upon the recipient. That is to say, they effect proprietary restitution for unjust enrichment. Of course, all instances of the same phenomenon should bear a single label, regardless of context. Consequently, the label of ‘resulting trust’ should apply whenever an unjust enrichment is reversed in specie. In Canada, however, the confusion runs much deeper, largely because the Supreme Court of Canada refuses to accept that constructive trusts are multi-causal. Twice the Court has purported to provide a unifying rationale, and twice it has failed. The first effort led to error and injustice; the second is destined to do so as well. 57 Keech v Sandford (1726) Sel Cas Ch 61 (LC); Boardman v Phipps [1967] 2 AC 46 (HL); Attorney General for Hong Kong v Reid [1994] 1 AC 324 (PC). 58 Lysaght v Edwards (1876) 2 Ch D 499 (CA). 59 Bannister v Bannister [1948] 2 All ER 133 (CA). 60 Re Rose [1952] Ch 499 (CA). 61 Baker v Inwards [1965] 2 QB 29 (CA). 62 Pallant v Morgan [1953] 1 Ch 43 (CA); Banner Homes Group plc v Luff Developments Ltd (No 2) [2000] Ch 372 (CA). 63 Ottaway v Norman [1972] Ch 698 (HC). 64 Dufour v Pereira (1769) 1 Dick 419 (HC of Chancery). 65 Pettkus v Becker [1980] 2 SCR 834 (SCC). 66 It has yet to be settled when restitution ought to be available proprietarily: compare Chambers, n 53 above; A Burrows The Law of Restitution (London, Butterworths, 2nd edn, 2002) 66–75. 67 Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 (HC). 68 Birks, n 23 above; Chambers, n 7 above.

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The problem began in Pettkus v Becker, when Dickson J said that ‘unjust enrichment [is] the principle lying at the heart of the constructive trust’.69 The Court subsequently reaffirmed that proposition, saying that the ‘requirement of unjust enrichment is fundamental to the use of a constructive trust’,70 that the constructive trust depends upon ‘whether a claim for unjust enrichment is established’,71 and that if there is ‘no unjust enrichment [there is] no possibility of a constructive trust’.72 The proposition appeared unequivocal: constructive trusts invariably are triggered by unjust enrichment. In truth, however, that proposition was incorrect and dangerous. The danger came to fruition in Lac Minerals Ltd v International Corona Resources Inc.73 The plaintiff, who possessed confidential information regarding the location of an enormous gold deposit, approached the defendant, a large mining company, with a view to a joint venture. The defendant unilaterally used that information to purchase the relevant properties from a third party named Williams. It should have been an easy case. As the Court previously had held on similar facts, benefits acquired through breach of confidence may be held on constructive trust.74 The majority opinion unfortunately fell victim to a fundamental taxonomic error. Having found a breach of confidence, La Forest J believed that justice would best be served by the imposition of a constructive trust, which precedent indicated was available only in connection with an ‘unjust enrichment’. That purported rule made (some75) sense only if the operative phrase was defined (in accordance with common Canadian practice) to include: • the action in unjust enrichment, which is confined to reversing unjustified transfers between the parties, and • situations of unjust enrichment by wrongdoing, in which the defendant is liable to disgorge the benefits that he acquired (occasionally from the plaintiff, but usually from a third party76) as a result of violating an obligation that he owed to the claimant. [1980] 2 SCR 834, 847 (SCC). Brissette Estate v Westbury Life Insurance Co [1992] 3 SCR 87, 96–7 (SCC). Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574, 674, 677 (SCC). 72 Hunter Engineering Co v Syncrude Canada Ltd [1989] 1 SCR 426, 470–1 (SCC). 73 [1989] 2 SCR 574 (SCC). 74 Pre-Cam Exploration & Development Ltd v McTavish [1966] SCR 551 (SCC). English law, in contrast, allows disgorgement under an account of profits but refuses to award relief proprietarily. 75 As explained below, even the generic conception of ‘unjust enrichment’ is too narrow because it fails to account for the perfectionary constructive trusts. 76 As when a trespasser is forced to give up the profits that he received from tourists whom he led across the claimant’s land without authority: Edwards v Lee’s Administrators 96 SW (2d) (1936 Ky CA). 69 70 71

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La Forest J, however, overlooked the latter category, and with it, the many instances in which equity has compelled proprietary disgorgement of wrongful gains. He instead narrowly interpreted the purported rule (that is, all constructive trusts arise from unjust enrichment) to mean that proprietary relief invariably requires proof of the action in unjust enrichment. And since the defendant had purchased the land from Williams, rather than from the plaintiff, a constructive trust appeared to be impossible. La Forest J overcame that obstacle by distorting principle,77 disregarding fact78 and finding a transactional nexus between the parties on the basis that the defendant had interceptively subtracted property from the plaintiff. The plaintiff supposedly suffered the requisite ‘corresponding deprivation’ because it probably would have acquired the property from Williams, but for the defendant’s wrongful intervention. The same error threatened Soulos v Korkontzilas.79 In breach of fiduciary duty, a real estate agent personally acquired a property that his client wished to purchase. The trial judge refused to impose a constructive trust because the defendant’s gain was not subtracted from the plaintiff client, and hence there was no unjust enrichment as purportedly required by precedent. The Ontario Court of Appeal, in contrast, awarded the plaintiff a beneficial interest in the property in order to vindicate the values underlying the defendant’s fiduciary duties. The Supreme Court of Canada agreed. In reaching that conclusion, McLachlin J, as she then was, recognised that the constructive trust is ‘an ancient and eclectic institution’ that is not confined to situations of unjust enrichment (however that phrase is defined).80 Unfortunately, having rectified one error, she immediately 77 Interceptive subtraction operates by satisfying the court that even though the defendant’s benefit was acquired from a third party, it effectively was subtracted from the plaintiff. In light of that purpose, the doctrine properly is limited to situations in which (i) the defendant intercepts an enrichment that the third party was legally obligated to transfer to the plaintiff and (ii) the defendant’s interception discharges the third party’s debt to the plaintiff. If those conditions are met, then the defendant’s gain undeniably comes at the plaintiff’s expense, and if restitution is denied, the parties necessarily will experience a corresponding enrichment and deprivation: Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 1308, 1314–15 (CA); L Smith, ‘Three-party Restitution: A Critique of Birks’s Theory of Interceptive Subtraction’ (1991) 11 Oxford Journal of Legal Studies 481; M McInnes, ‘Interceptive Subtraction Unjust Enrichment and Wrongs—A Reply to Professor Birks’s (2003) 62 CLJ 697; cf P Birks, ‘At the Expense of the Claimant: Direct and Indirect Enrichment in English Law’ in D Johnston and R Zimmerman (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2001) 509. 78 La Forest J accepted that interceptive subtraction requires proof that, but for the defendant’s intervention, the plaintiff ‘certainly’ would have acquired the benefit from the third party: [1989] 2 SCR 574, 668–9, citing P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon, 1985) 134. At trial, however, the judge merely found that ‘but for the actions of [the defendant], [the plaintiff] probably would have acquired the . . . property’: (1989) 25 DLR (4th) 504, 546 (Ont HCJ). 79 [1997] 2 SCR 217 (SCC). 80 Ibid, 227–8.

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committed another.81 Still insisting that all constructive trusts are referable to a single principle, she replaced the ambiguous conception of ‘unjust enrichment’ with a two-part doctrine of ‘good conscience’. Canadian law therefore now states that a constructive trust is available under the broad umbrella of good conscience . . . for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation.82

Of course, those are the same two components previously placed under the rubric of ‘unjust enrichment’. As Birks’s taxonomy clearly demonstrates, and as the Court eventually will be compelled to accept, however, there are some constructive trusts (that is, those that arise for perfectionary purposes) that arise not from wrongdoing or unjust enrichment, but rather for some other miscellaneous species of causative event.

B Unjust Enrichment and Restitution Insofar as they consist of orders available upon proof of a cause of action, legal responses properly arise in reaction to particular mischiefs and in fulfilment of particular purposes. For instance, because the tort of negligence is concerned with carelessly inflicted injuries, it naturally culminates in compensatory damages. Similarly, because equity takes seriously promises to sell unique assets, it provides the option of specific performance. Not surprisingly, remedies formulated in one context may be entirely inappropriate in another. Unfortunately, without a taxonomy to hold the pieces in place, that fact is easily overlooked. In the desire to achieve ‘justice’, judges increasingly reach to the ‘basket of remedies’. Many Commonwealth courts (and especially courts in Canada) have come to view event and response as independent inquiries.83 81 Leaving aside taxonomic issues, McLachlin J’s judgment is controversial insofar as it adopts Professor Goode’s four-part test for the imposition of a constructive trust over wrongful gains: [1997] 2 SCR 217, 240–1, quoting R Goode, ‘Property and Unjust Enrichment’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Clarendon, 1991) 237–44. That test requires proof that (1) the defendant breached an equitable obligation owed to the plaintiff; (2) the asset was acquired by the defendant through an actual or deemed agency gain; (3) the plaintiff has a legitimate reason for seeking the benefit in specie; and (4) the imposition of a trust would not otherwise create injustice (for example, for the defendant’s other creditors). While that test fortuitously facilitated proprietary relief in Soulos, it is contrary to the general thrust of the Court’s attitude toward constructive trusts, and it is likely that the Court eventually will have occasion to revisit the issue. 82 Ibid, 240. 83 Canada: The Hon Justice B McLachlin, ‘A Canadian Perspective’ in D Waters (ed), Equity, Fiduciaries and Trusts 1993 (Toronto, Carswell, 1993) 37; D Waters, ‘Liability and Remedy: An Adjustable Relationship’ (2001) 64 Saskatchewan Law Review 429, 442; S Waddams,

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Mitchell McInnes With liability out of the way, the judge [can be] envisaged, partly obscured by the bench, humped over a large hamper-like basket busily fossicking around for a likely remedy.84

The ‘remedy is dictated by the facts of the case rather than strict jurisdictional or doctrinal considerations’.85 That phenomenon can be seen in the Supreme Court of Canada. Its habit of referring to restitution under a variety of non-restitutionary labels, such as ‘compensation’86 or ‘disgorgement’87 (in much the same way that it frequently says ‘restitution’ when it means something else88), certainly complicates matters. The real problem, however, is substantive. On a number of occasions, the Court has responded to unjust enrichment with something other than restitution. While the equation may not work in reverse,89 it generally is accepted that the event of unjust enrichment invariably triggers restituDimensions of Private Law: Categories and Concepts in Anglo-Canadian Legal Reasoning (Cambridge, Cambridge University Press, 2003); Pettkus v Becker [1980] 2 SCR 834, 847 (SCC). England: J Davies, ‘Duties of Confidence and Loyalty’ [1990] Lloyd’s Maritime and Commercial Law Quarterly 4; J Davies, ‘Restitution and Equitable Wrongs’ in F Rose, (ed), Consensus ad Idem: Essays on Contract in Honour of Guenter Treitel (London, Sweet & Maxwell, 1996) 158; K Barker and L Smith, ‘Unjust Enrichment’ in D Hayton (ed), Law’s Future (Oxford, Hart Publishing, 2000) 413–14, 423–4. Australia: The Hon Justice P Finn, ‘Equitable Doctrine and Discretion in Remedies’ in W Cornish et al (eds), Restitution: Past, Present and Future (Oxford, Hart Publishing, 1998) 273–4; M Tilbury, ‘Remedies and the Classification of Obligations’ in A Robertson (ed), The Law of Obligations: Connections and Boundaries (London, UCL Press, 2004) 11; S Evans, ‘Defending Discretionary Remedialism’ (2001) 23 Sydney Law Review 463. New Zealand: Sir Robin Cooke, ‘A New Zealand Perspective’ in D Waters (ed), Equity, Fiduciaries and Trusts 1993 (Toronto, Carswell, 1993) 25; G Hammond, ‘The Place of Damages in the Scheme of Remedies’ in P Finn (ed), Essays on Damages (Sydney, Law Book, 1992) 223; Butler v Countrywide Finance Ltd [1993] 3 NZLR 623, 631 (NZCA). Cf P Birks, ‘Three Kinds of Objection to Discretionary Remedialism’ (2000) 29 University of Western Australia Law Review 1; J Smillie, ‘Certainty and Civil Obligation’ (2000) 9 Otago Law Review 633. 84 The Hon Justice E Thomas, ‘An Endorsement of a More Flexible Law of Civil Remedies’ (1999) 7 Waikato Law Review 23. 85 Cadbury Schweppes Inc v FBI Foods Ltd [1999] 1 SCR 142, 159 (SCC). 86 Peter v Beblow [1993] 1 SCR 980, 995, 997, 1014–15, 1017–18 (SCC). 87 Air Canada v Ontario (Liquor Control Board) [1997] 2 SCR 581, 611 (SCC); Peel (Regional Municipality) v Canada [1992] 2 SCR 762, 802 (SCC); Citadel General Assurance Co v Lloyds Bank Canada [1997] 3 SCR 805, 838 (SCC); Garland v Consumers’ Gas Co [2004] 1 SCR 629, 658 (SCC). 88 ‘Restitution’ to mean compensation: Andrews v Grand & Toy Alberta Ltd [1978] 2 SCR 229, 241 (SCC); Hodgkinson v Simms [1994] 3 SCR 377 (SCC); Guerin v The Queen [1984] 2 SCR 335, 360–1 (SCC); Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 531, 547–50, 565–6, 570–1, 576 (SCC). ‘Restitution’ to mean disgorgement: Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574, 616 (SCC). 89 While Birks came to believe that ‘restitution’ (ambiguously defined to include both restitution and disgorgement) is ‘multi-causal’, it is better to insist upon quadration, such that restitution and unjust enrichment are perfectly coterminous: P Birks, ‘Misnomer’ in Cornish et al, n 13 above; Birks, n 3 above); cf M McInnes, ‘Unjust Enrichment and the Perfect Quadration Thesis’ [1999] Restitution Law Review 118; McInnes, n 22 above.

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tion.90 Full proof of that proposition lies beyond the scope of this essay.91 Much of the explanation, however, undoubtedly lies in the fact that liability in unjust enrichment is strict in the sense that it does not presume the breach of an obligation. In the absence of wrongdoing, there is no warrant for imposing a loss upon the defendant or conferring a windfall upon the plaintiff.92 The underlying event merely justifies restoring the status quo ante by reversing the transfer between the parties.93 That same conclusion is dictated by the constituent elements of proof: (1) the defendant received a benefit (2) from the plaintiff (3) in the absence of a juristic reason. The only coherent response is restitution. A remedy focused exclusively on the plaintiff’s loss would ignore the first part of the claim, just as a remedy focused exclusively on the defendant’s gain would ignore the second part of the claim. Birks’s taxonomy clearly reveals the preceding point. Uniquely among the four categories of causative events, unjust enrichment supports only one response: restitution. Canadian courts, however, frequently award compensation instead.94 Not surprisingly, the error is most egregious in the context of claims for services rendered during cohabitation. Restitution is poorly suited to redressing the fallout of failed intimate relationships. Upon separation, the non-titled spouse does not deserve to be treated like hired help, receiving no more than fair market value for her efforts.95 She seeks instead a remedy that reflects the essence of the underlying relationship, in which burdens and benefits were shared equally and on an assumption of permanence. And, in fact, Canadian judges habitually measure relief that fulfils that reasonable 90 The measure of restitution takes a variety of forms: personal obligation, rescission, subrogation, trust, lien, and so on. 91 M McInnes, ‘The Measure of Restitution’ (2002) 52 University of Toronto Law Journal 163. 92 A policy-based version of the same argument works in reverse. In order for unjust enrichment to trigger compensation or disgorgement, it would have to involve an element of fault. In the abstract, those remedial options may seem desirable. The great danger of such a proposal, however, is that by requiring wrongdoing, the courts would put unjust enrichment beyond the reach of those claimants who, while unable to establish breach of an obligation, ought to be entitled to the less intrusive remedy of restitution. 93 Liability is justified, despite the absence of breach, because the impugned transfer simultaneously enriched the defendant and impoverished the claimant: J Dawson, Unjust Enrichment: A Comparative Analysis (Boston, MA, Little Brown & Co, 1951) 7; L Fuller and W Perdue, ‘The Reliance Interest in Contract Damages’ (1936) 46 Yale Law Journal 52, 56. 94 In cataloguing the ‘principles or guidelines [that] appear to be emerging’ in the Canadian law of unjust enrichment, Chambers noted (tongue in cheek) that ‘there are two main remedies for unjust enrichment: compensatory damages or constructive trust’: ‘Regional Digest: Canada’ [2006] Restitution Law Review 146. Even more remarkably, the Supreme Court of Canada has contemplated responding to unjust enrichment with punitive damages: Air Canada v Ontario (Liquor Control Board) [1997] 2 SCR 581, 613. 95 The situation is different if the parties, while related, did not share an intimate relationship: Deglman v Guaranty Trust Co [1954] SCR 725 (SCC).

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expectation.96 Because ‘the balancing of benefits conferred and received in a matrimonial or common law relationship cannot be accomplished with precision’, the Supreme Court of Canada merely aims to ‘achieve a fair result’, having regard to ‘common sense’, ‘[t]he nature of the relationship, its duration and the contributions of the parties’.97 The problem, of course, is that the fulfilment of expectations lies beyond the power of unjust enrichment. Such a response logically presumes some forward-looking event. It therefore generally is confined to contract, which in essence is concerned with promises of performance. Upon the creation of an enforceable agreement, the plaintiff becomes entitled to the anticipated benefit, either directly or by way of monetary proxy. Expectation damages consequently reflect the underlying event. Unjust enrichment, in contrast, looks exclusively to the past. It pertains to something that ought not to have happened and says nothing at all about the future. It is capable of supporting expectation relief only if the courts are prepared to treat the cause of action not as a principled exercise, but rather as an open invitation to achieve perceived ‘justice’. While the thesis necessarily is speculative, it seems likely that Canadian courts settled upon unjust enrichment for the resolution of cohabitational property disputes for purely pragmatic reasons. Established judicial doctrine appeared to be incapable of facilitating fair solutions98 and legislatures appeared indifferent. At the same time, the doctrines of unjust enrichment and constructive trust held the twin attractions of being (i) very old and hence respectable, and (ii) poorly understood and hence highly malleable. The combination made for sympathetic social policy, but as a matter of taxonomic principle, it was indefensible. And because of that lack of principle, the Canadian law of unjust enrichment continues to be haphazard and unpredictable, in both cohabitational and commercial cases.

III

CONCLUSION

For Canadian courts, Birks largely remains a missed opportunity. The Supreme Court of Canada has cited him only six times. On three occasions, the Court fundamentally misconstrued his analysis.99 In a fourth case, it 96 Pettkus v Becker [1980] 2 SCR 834 (SCC); Peter v Beblow [1993] 1 SCR 980 (SCC); cf Nowell v Town Estate (1997) 35 OR (3d) 415 (Ont CA) (apparently arbitrary award of $300,000 in ‘compensation for unjust enrichment’). 97 Peter v Beblow [1993] 1 SCR 980, 1017, 1023 (SCC). 98 Murdoch v Murdoch (1973) 41 DLR (3d) 367 (SCC) (denying relief to non-titled spouse); Rathwell v Rathwell [1978] 2 SCR 436 (SCC) (unprincipled use of ‘common intention resulting trust’). 99 Citadel General Assurance Co v Lloyds Bank Canada [1997] 3 SCR 805 (SCC) (overlooking the effect of change of position and misinterpreting strict liability as absolute

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summarily rejected his criticism of remedial discretion.100 In a fifth, it dismissed his argument that constitutional principle requires the recoverability of money paid pursuant to ultra vires demands101 (only later to recognise that it had erred in doing so102). And in the final case, the Court merely cited Birks for the uncontroversial proposition that a breach of fiduciary duty may trigger a constructive trust.103 The point, of course, is not that Canadian courts should always adopt Birks’s position. As demonstrated in the House of Lords104 and the High Court of Australia,105 however, serious consideration of Birks’s position does invariably raise the debate to an appropriate level.

liability); Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574 (SCC) (distorting the doctrine of interceptive subtraction and confusing ‘unjust enrichment by wrongdoing’ for the action in unjust enrichment); Kingstreet Investments Ltd v New Brunswick [2007] SCC 1 (allowing restitution of payment of ultra vires demand, but insisting that the claim does not arise in unjust enrichment). Cadbury Schweppes Inc v FBI Foods Ltd 1999] 1 SCR 142 (SCC). Air Canada v British Columbia [1989] 1 SCR 1161 (SCC). Re Eurig Estate [1998] 2 SCR 565 (SCC). Soulos v Korkontzilas [1997] 2 SCR 217 (SCC). Deutsche Morgan Grenfell Group plc v IRC [2006] 3 WLR 781 (HL); Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349 (HL); Foskett v McKeown [2001] 1 AC 102 (HL); Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL); Woolwich Building Society v IRC [1993] AC 70 (HL). 105 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (HCA); David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 (HCA). 100 101 102 103 104

6 Legal Positivism and the Taxonomy of Private Law LEGAL POS I TI VI S M AND THE TAXONOMY OF PRI VATE LAW

EMILY S HERWIN * EMI LY S HERWI N

P

ETER BIRKS IS internationally renowned for his work on unjust enrichment. What most interested Birks, however, was not what unjust enrichment means—what counts as enrichment and when enrichment is unjust—but what position unjust enrichment occupies in the overall scheme of private law. Birks’s master project was a hierarchical rights-based taxonomy of the law. The classification he proposed began with the fundamental division between public and private law; divided private law into the law of persons, the law of rights and the law of actions; further divided rights into property rights and obligations between parties; then sorted obligations according to the ‘causative events’ that give rise to them.1 Unjust enrichment, in Birks’ view, is one of these causative events.2 As such, it belongs in a series that includes manifestations of consent (such as contracts and wills), wrongs (such as torts and breaches of contract), unjust enrichment and other miscellaneous events. It follows that references to ‘tort, contract, and restitution’ as the categories of legal obligation are mistaken: restitution is not a causative event but a response to legal * Professor of Law, Cornell University Law School. Thanks to Kevin Clermont, Hanoch Dagan, Trevor Morrison, and the Cornell University Law School Reading Group for very helpful comments. 1 Birks’s taxonomic scheme is set forth succinctly in P Birks, English Private Law (Oxford, Oxford University Press, 2000) xxxv–xliii. For additional statements, see, eg P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2003) 19–35; P Birks, ‘Definition and Division, A Meditation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon Press, 1997) 1, 35; P Birks, ‘Unjust Enrichment and Wrongful Enrichment’ (2001) 79 Texas Law Review 1767, 1778–9; P Birks, ‘Equity in the Modern Law’ (1996) 26 University of Western Australia Law Review 1, 8. For an early version, see P Birks, An Introduction to the Law of Restitution (Oxford, Oxford University Press, 1985) 28–48. Birks derived his scheme, with adjustments, from Justinian’s Institutes. See Birks, ‘Definition and Division’, 2–12. 2 See, eg Birks, English Private Law, ibid, xli–xlii; Birks, Unjust Enrichment, ibid, 20–1; Birks, ‘Definition and Division’, ibid, 19–21; Birks, ‘Unjust Enrichment and Wrongful Enrichment’, ibid, 1771–2, 1777–9.

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rights arising in various ways. ‘Tort, contract, and restitution’ is a ‘bent’ classification.3 It follows also that unjust enrichment does not include enrichment attributable to a wrong, because inclusion of wrongful enrichment within unjust enrichment would result in a duplication of instances within the different categories of causative events.4 As a matter of taxonomic logic, the points Birks makes about unjust enrichment are quite persuasive. Americans, however, may be puzzled both by Birks’s treatment of unjust enrichment and by the larger taxonomical project of which it is a part. The problem is not that Americans have no use for legal taxonomy. American legal vocabulary, no less than English legal vocabulary, relies on classifications of legal material. Americans refer to types of rules (tort, contract), types of legal relations (rights and duties, powers and immunities) and types of judicial protection for legal rights (preventative remedies, compensatory remedies, restitution). Observing Birks’s project, however, scholars of an American turn of mind may conclude that he has overlooked what is truly important in legal classification: the purposes and principles that animate legal decision-making. These are the features of law we care about, because they enable us to interpret, apply, expand and criticise the law; therefore, these are the features that should define and distinguish legal categories. In this spirit, Hanoch Dagan, writing from a point of view inspired by American legal realism, suggests that what he calls doctrinalist legal taxonomy can obscure the dynamic quality of law and the values that motivate legal decision-making.5 Realists, he argues, can profit from legal taxonomy, but only if legal relations are classed according to their normative commonalities.6 Realist taxonomy is purposive, revisable, tailored to capture the types of ‘life situations’ regulated by law, and consequently resistant to the strict logical discipline Birks aspired to impose through his master scheme of law.7 My object in this essay is to examine more closely how and why scholars working from different perspectives might differ in their approaches to legal taxonomy. Ultimately, I shall defend, in a limited way, Birks, ‘Definition and Division’, ibid, 21. See Birks, ‘Unjust Enrichment and Wrongful Enrichment’, n 1 above, 1781–3. See H Dagan, ‘Legal Realism and the Taxonomy of Private Law’, ch 8 of this volume. See also D Campbell, ‘Classification and the Crisis of the Common Law’ (1999) 26 Journal of Law and Society 369 (criticising ‘abstract doctrinal’ attempts to classify law as indifferent to social and economic reality); P Jaffey, ‘Classification and Unjust Enrichment’ (2004) 67 MLR 1012 (arguing that unjust enrichment fails as a ‘justificatory’ category of law); G Samuel, ‘English Private Law: Old and New Thinking in the Taxonomical Debate’ (2004) 24 Oxford Journal of Legal Studies 335 (proposing a classification scheme based on different forms of social relations in modern life). 6 See Dagan, ibid. 7 Ibid, quoting K Llewellyn, Jurisprudence: Realism in Theory and Practice (Chicago, IL, University of Chicago Press, 1962) 27–8, 32. 3 4 5

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the approach taken by Birks. I begin by asking three questions about the enterprise of legal classification, each of which can be answered in several different ways. First, what is the subject matter to be classified? Second, what are the criteria for classification? Third, what are the purposes of legal classification? I address these questions in the order just presented even though, not surprisingly, the classifier’s purpose often limits or determines both the choice of subject matter and the criteria for classification.8 After setting out the possibilities, I briefly address the relationship between legal taxonomy and legal positivism. Then I return, again briefly, to the problem of unjust enrichment.

I

A

T H R E E C H O I C E S F O R L E G A L TAX O N O M E RS

The Raw Material for Classification

The subject matter of legal taxonomy may seem obvious: the taxonomer is sorting and classifying law. For this purpose, however, law can be understood in a number of ways. At least three possibilities come to mind, and these may not be exhaustive. (i)

Posited Rules

First, the law to be classified might be the set of legal rules posited by authoritative sources. By rules, I mean prescriptions that are intended to direct future decision-making and are determinate enough to do so effectively.9 In a legal system that accepts the doctrine of precedent, courts as well as legislatures have authority to posit legal rules. Legislative rules normally are explicit. Judicial rules may be either explicit or implicit in a court’s explanation of reasons for a particular decision. To count as posited rules, however, they must be intended to operate as standards for decision, dictating the outcome of all cases that fall within their terms. Implicit judicial rules count as posited rules only if the court’s opinion indicates that 8 My analysis of the purposes of classification draws on a very articulate discussion by Jaffey, n 5 above. 9 For discussion of the nature, function and problems of ‘serious’ authoritative rules, see L Alexander and E Sherwin, The Rules of Rules: Morality, Rules, and the Dilemmas of Law (London, Duke University Press, 2001) 53–95; J Raz, The Morality of Freedom (Oxford, Clarendon Press, 1986) 57–62; J Raz, The Authority of Law (Oxford, Clarendon Press, 1979) 16–19, 22–3, 30–3; F Schauer, Playing By the Rules: A Philosophical Examination of Rule-based Decision-making in Life and Law (New York, Oxford University Press, 1991) 42–52, 77–134.

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it viewed the decision it reached as representative of a more general prescription that might be decisive in other cases as well.10 Posited legal rules may vary in their generality.11 A narrow description of the facts and outcome of a case is a rule if it accurately depicts what the court intended its decision to ‘stand for’ as precedent. The nature of language is such that even a minimal description of facts necessarily entails some generalisation. The generalisation entailed in the court’s description of the dispute then becomes a rule governing future cases that fall within it. At the other end of the continuum, rationales offered by precedent courts are rules if the precedent court intended them to serve as decisional standards for future cases and if they are determinate enough that future courts can apply them without engaging in controversial moral analysis.12 (ii) Ideal Rules Second, the subject matter to be classified might be an ideal body of law. In other words, the object of legal taxonomy might be to identify categories that capture the best imaginable set of posited legal rules.13 This suggests a very active role for the taxonomist, who must begin by imagining the best possible law according to an external criterion of legal goodness—moral, economic or otherwise. Once this task is complete, however, taxonomy itself is not of great consequence; legal categories should fall into place relatively quickly and uncontroversially, according to the same standard or standards that define ideal law. (iii) Attributed Rules Third, the law to be classified may be a set of rules or principles attributed to prior legal decisions or existing legal rules. An attributed rule or 10 See L Alexander and E Sherwin, Demystifying Legal Reasoning (forthcoming) ch 2 at notes 55–7. On canonicity as a characteristic of rules, see Schauer, ibid, 68–72; F Schauer, ‘Prescriptions in Three Dimensions’ (1997) 82 Iowa Law Review 911, 916–18. 11 On generality as a characteristic of rules, see Schauer, ibid, 17–37. A distinction is often drawn between rule and ‘standards,’ which are not sufficiently determinate to dictate results without reference to controversial moral or evaluative propositions. See, eg Alexander and Sherwin, n 7 above, 29–30; C Sunstein, Legal Reasoning and Political Conflict (New York, Oxford University Press, 1996) 27–8; L Kaplow, ‘Rules versus Standards: An Economic Analysis’ (1992) 42 Duke Law Review 557; C Rose, ‘Crystals and Mud in Property Law’ (1988) 40 Stanford Law Review 577. 12 My analysis assumes that language can carry determinate meaning. See, eg K Greenawalt, Law and Objectivity (New York, Oxford University Press, 1992) 34–89; H Hart, The Concept of Law (Oxford, Clarendon Press, 1961) 132–44; Schauer, n 7 above, 53–68; J Coleman and B Leiter, ‘Determinacy, Objectivity, and Authority’ (1992) 142 University of Pennsylvania Law Review 549; S Lawrence, ‘On the Indeterminacy Crisis: Critiquing Critical Dogma’ (1987) 54 University of Chicago Law Review 462. 13 Judge Richard Posner’s economic analysis of law might be viewed as a project of this kind. See R Posner, Economic Analysis of Law (New York, Aspen Publishers, 6th edn, 2003).

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principle is an explanation ‘abduced’14 by some future decision-maker or observer from the facts and outcomes of judicial decisions (or from the factual predicates and prescribed outcomes of posited rules). Typically, the person formulating an attributed rule or principle seeks the morally best explanation that fits the data of legal material.15 An attributed rule or principle, in other words, is a best-it-can-be representation of the pre-existing raw material of law. Attributed rules and principles are not posited by the courts and legislatures that generate the decisions and rules from which they are drawn. Instead, their authors are the persons who abduce them from existing legal material. Attribution of this kind is not, in my view, a form of ‘interpretation’.16 I assume throughout this essay that the meaning of any rule (or other text) is determined by the intentions of its authors.17 Interpretation, accordingly, is the process of discerning intended meaning. Any other ascription of meaning to a text, including attribution of rules and principles to legal materials generated by others, is not interpretation but authorship of a new text. This is, of course, a contested position, which I shall not attempt to defend here. Like posited rules, attributed rules and principles can be general or specific. An attributed rule may be based on a minimal description of the facts and outcome of a judicial decision (the best description of what the case ‘stands for’). It is nevertheless an attributed rule if it differs from the precedent court’s own description of the case, or if the precedent court did not intend to establish a rule. Alternatively, an observer of legal material may formulate a broader proposition to explain a judicial decision, a pattern of decisions, a judicial or legislative rule, or some combination of legal materials. The result is what Ronald Dworkin has called a ‘legal principle’.18 I shall have more to say in later sections about legal principles. For now, I shall simply repeat that a legal principle is not an interpretation of the intentions of prior authorities, but a construct generated by a later court or observer working from pre-existing legal materials. 14 Abduction is the term Charles Peirce used to describe the process by which scientists move from observed data to tentative explanatory hypotheses. See C Peirce, Philosophical Writings of Peirce, J Buchler ed (New York, Dover, 1955) 150–6; S Brewer, ‘Exemplary Reasoning: Semantics, Pragmatics, and the Rational Force of Legal Argument by Analogy’ (1996) 109 Harvard Law Review 923, 945–9. 15 Ronald Dworkin’s description of ‘legal principles’ follows this model. See R Dworkin, Law’s Empire (London, Fontana, 1986) 254–8; R Dworkin, Taking Rights Seriously (London, Duckworth, 1978) 115–18. 16 Cf R Dworkin, Law’s Empire, ibid, 49, 228 (using the term interpretation in a special sense that refers to the insider’s perspective toward law). 17 For full discussion, see Alexander and Sherwin, n 10 above, chs 5–8; Alexander and Sherwin, n 7 above, 96–122. 18 Dworkin, Law’s Empire, n 15 above, 240–50, 254–8; Dworkin, Taking Rights Seriously, n 15 above, 22–31, 115–18.

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(iv)

Summary

Legal taxonomy may operate on posited rules, ideal rules or semi-ideal rules attributed to legal decisions. None of these is superior in and of itself. The choice of subject matter will depend, naturally enough, on the classifier’s method and purpose.

B Criteria for Classifying Law A second dimension in which legal taxonomies might differ is the criteria for classification: how are the categories of law defined? (i)

Intuition

Some have suggested that the facts that generate legal decisions differ in ways that can be grasped intuitively, at least by those who are well trained in law.19 As a criterion for classifying legal decisions, however, intuitive similarity is probably illusory, and in any event unsatisfactory. Any two factual settings are alike and unlike in an indefinite number of ways, and the only way to determine which similarities and differences should count is to refer to some purpose or principle that picks out certain of them as relevant to what is being decided.20 For example, if a widely accepted moral principle holds that wrongdoers should not profit from their wrongs, this principle makes the gains a defendant received from wrongdoing a salient feature of his situation, while the clothes he wore at the time are of no consequence. Some such principles are so deeply internalised that what appears to be an intuitive judgment of similarity between cases may in fact be a rapid reference to a principle that makes particular common features of the cases important. This assumption—that, for purposes of legal analysis, analogies between cases are not simply facts to be perceived but depend on general propositions that identify important similarities—is an important premise in my analysis, which I shall refer back to at several points. 19 See, eg S Burton, An Introduction to Law and Legal Reasoning (Boston, MA, Little Brown, 1995) 27–41; A Kronman, The Lost Lawyer: Failing Ideals of the Legal Profession (London, Belknap Press of Harvard University Press, 1995) 109–62, 170–85, 209–25; E Levi, An Introduction to Legal Reasoning (Chicago, IL, University of Chicago Press, 1948) 1–6; L Weinreb, Legal Reason: The Use of Analogy in Legal Argument (Cambridge, Cambridge University Press, 2005) 78–90; C Fried, ‘The Artificial Reason of the Law or: What Lawyers Know’ (1981) 60 Texas Law Review 35, 57. 20 At least, this is true of facts as they exist in the world, as opposed to factual summaries presented in judicial opinions. M Eisenberg, The Nature of the Common Law (Cambridge, MA, Harvard University Press, 1988) 84–7; Schauer, n 7 above, 183–7; Brewer, n 14 above, 962–5; P Westen, ‘On “Confusing Ideas”: Reply’ (1982) 91 Yale Law Journal 1153, 1163.

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As a psychological matter, it may be possible to arrive at a judgment of similarity based on pattern recognition or a spontaneous emotional response to given facts.21 Law, however, is supposed to be a reasoned enterprise, and a scheme of classification that relies on mechanisms of this kind is not reasoned.22 It cannot be explained in terms accessible to others, and it provides no basis for distinguishing between correct and incorrect judgments. Thus, purely intuitive similarity, if it exists, is not a sound basis for legal classification. (ii) Evolutionary History A more promising method of classification might be to sort legal materials according to common descent, on the model of Darwinian taxonomy in natural science. Owing to the doctrine of precedent, common law rules have an evolutionary history. For example, some rules and remedies were first developed by the English Chancellor, while others emerged in decisions of the Court of King’s Bench or the Court of Common Pleas. For most purposes, however, common origin is not a sensible criterion for classifying modern law. Legal arguments that rely on the equitable origins of particular claims, or are traceable to medieval forms of action, are often discredited as anachronisms that ought to purged from modern practice.23 (iii) Formal Classification Birks argued that the proper criterion for classification of law is a type of internal structure, or ‘logic’, in which legal categories comply with a set of formal rules. 24 One such rule is that legal categories must not overlap. (For example, unjust enrichment cannot include enrichment stemming from wrongs because wrongs form a separate category of causative event 21 For a discussion of incompletely reasoned, or ‘System I’, responses in human psychology, see generally G Lakoff and M Johnson, Philosophy in the Flesh: The Embodied Mind and Its Challenge to Western Thought (New York, Basic Books, 1999); G Lakoff and M Johnson, Metaphors We Live By (Chicago, IL, University of Chicago Press, 1981); H Margolis, Patterns, Thinking, and Cognition: A Theory of Judgment (Chicago, IL, Chicago University Press, 1987) 1–6, 42–86; S Sloman, ‘Two Systems of Reasoning’ in T Gilovick, D Griffin and D Kahneman (eds), Heuristics and Biases: The Psychology of Intuitive Judgment (Chicago, IL, University of Chicago Press, 2002) 379; J Haidt, ‘The Emotional Dog and Its Rational Tail: A Social Intuitionist Approach to Moral Judgment’ (2991) 4 Psychological Review 814. 22 I assume that reasoning entails conscious deliberation about choices in terms capable of articulation. See Haidt, ibid, 818. 23 See Birks, ‘Definition and Division’, n 1 above, 15–17. But cf Birks, ‘Equity’, n 1 above, 8–9 (suggesting a ‘background’ division of law according to ‘jurisdictional origin’). 24 See, eg Birks, English Private Law, n 1 above, xxxv–vi (citing the need for ‘a structured overview of the law as a whole’). Birks questioned Holmes’s assertion that ‘The life of the law has not been logic’: see Birks, ‘Equity’, n 1 above, 4, quoting O Holmes, The Common Law (Boston, MA, Little Brown, 1881) 1. In Birks’s view, ‘the law, if not wholly dependent on logic, certainly cannot consist in fallacy and contradiction. We need that warning against intellectual disorder.’

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for obligations.25) Another rule of classification requires a clean hierarchical order in which all subcategories are in fact instances of the categories to which they belong. (For example, ‘tort, contract, restitution’ is a mistaken classification because restitution, a legal response to rights, cannot be located within the category of causative events.26) The categories that make up a legal taxonomy must be comprehensive, encompassing the full range of legal material. (For example, to ensure that his scheme was complete, Birks rounded out his list of causative events for obligations with a catch-all category of ‘other events’.27) Presumably, legal categories also must be sufficiently tailored and determinate to provide a comprehensible description of the instances that fall within them.28 Following Peter Jaffey, I shall refer to this type of classification as formal legal classification.29 Of course, taxonomy cannot be wholly formal without dissolving into nonsense. At best, logic can determine the relationships among categories of law; it cannot determine which features of the various raw materials of law are substantively important. Even formal taxonomy is a purposive activity, and the categories it establishes must track differences that matter for the purpose of the enterprise. It does not follow, however, that legal materials must be classified according to their purposes. A minimal conception of the purpose of a legal system should be enough to support an orderly taxonomy of law. Suppose, for example, that the primary function of law is to settle disputes among members of a community whose activities conflict, and that classifying legal materials will advance the goal of settlement by making legal materials more accessible to those who must apply them or rely on them to 25 ‘The test of the validity of a taxonomy is precisely the question of whether any item within its purview can appear in more than one category pitched at the same level of generality . . . It is no more possible for the selected causal event to be both an unjust enrichment and a tort than it is for an animal to be both an insect and a mammal’: Birks, ‘Unjust Enrichment and Wrongful Enrichment’, n 1 above, 1780–1. 26 See Birks, ‘Definition and Division’, n 1 above, 20–1; Birks, ‘Unjust Enrichment and Wrongful Enrichment’, n 1 above, 1768–9, 1771–2. 27 See Birks, English Private Law, n 1 above, xlii; Birks, Unjust Enrichment, n 1 above, 21–2; Birks, ‘Definition and Division’, n 1 above, 19; Birks, ‘Unjust Enrichment and Wrongful Enrichment’, n 1 above, 1769. 28 See N McBride, ‘The Classification of Obligations and Legal Education’ in Birks, The Classification of Obligations, n 1 above, 71, 79 (listing, as one of six guidelines for classification of obligations, a requirement that obligations must not be ‘completely indeterminate’). 29 Jaffey, n 5 above, 1015–17. Jaffey distinguishes between formal classification and ‘justificatory’ classification at 1013–15. Another example of formal classification comes from Nicholas McBride. McBride argues that classification should ‘tell us all there is to know about our obligations in the most economical and accurate manner’: McBride, ibid, 72. This requires a list in which no obligation listed is ‘an instance of another obligation on the list’ and no two obligations on the list ‘are both instances of another obligation which is not on the list’: ibid, 74, 78. See also S Smith, ‘Taking Law Seriously’ (2000) 50 University of Toronto Law Journal 241, 254–5 (defending Birks’s taxonomic scheme, which Smith describes as giving ‘moderate’ recognition to the law’s own organisational ‘self-understanding’).

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plan their activities.30 These assumptions provide a starting point for formal classification: the categories of law should correspond to the types of conflicts that typically result in grievances between individuals, or between individuals and the state. Thus, although any scheme of classification must inevitably be informed by the purposes of law, categories within the classification need not track the purposes of particular laws. In a formal scheme of classification, the categories of law are descriptive rather than normative. A normative proposition also provides a reason for action for anyone who accepts it as true or otherwise authoritative. The reason for action provided by a normative proposition need not be conclusive, but it at least weighs in favour of a particular choice. In contrast, categories within a formal scheme of legal classification are normatively inert. Consider, for example, the term unjust enrichment, which is shorthand for the proposition that one person should not obtain or retain value at another’s expense, in circumstances deemed to be unjust. In a legal context, unjust enrichment is descriptive when used to describe a class of events; it is normative when used to describe a reason for courts to prevent or correct unjust enrichment when it occurs. Because formal classification is descriptive, without normative implications, it naturally operates on the subject matter of actual posited legal rules. Formal classification might also accompany a set of ideal legal rules, with the rules themselves functioning as decisional standards for courts and the classification of rules providing non-normative organisational support. A formal taxonomy of ideal legal rules or attributed legal rules is logically possible, but unlikely in practice. The first step in such a project would be to determine ideal law or abduce attributed rules from existing legal material. These are active processes calling for the exercise of moral judgment. The second step, in contrast, would be a passive, non-normative categorisation. This combination is not likely to appeal to taxonomers: the same scholarly interests and assumptions that lead a taxonomer to attempt to formulate ideal rules or extrapolate best-they-can-be legal rules from actual decisions will also tend to attract him or her to a normative framework for legal classification. (iv)

Reason-based Classification

This leads to the main competitor to formal classification in the style of Birks: classification of legal materials according to the principles or purposes that animate them. Any sound rule is an instantiation of broader purposes or principles, and any sound judicial decision either implements 30 On the settlement function of law, see Alexander and Sherwin, n 9 above, 11–15; Eisenberg, n 20 above, 4–7; J Raz, Ethics in the Public Domain (Oxford, Clarendon Press, 1994) 187–92.

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such a rule or is itself based on a higher-order principle or purpose.31 For example, certain judicial decisions and posited rules may reflect a principle that wrongful harm creates or imposes a moral obligation of redress on the wrongdoer, or that losses should be charged to the party best able to avoid them in order to encourage due care. Others may reflect a principle that promises should be honoured, or that deterring breaches of promise will facilitate efficient exchange. In what I shall call a reason-based method of legal classification, these common justifying principles define the categories of law.32 A project of reason-based legal classification can proceed in three ways. First, the taxonomer can seek out the justifying reasons that in fact motivated judges and legislators to reach legal decisions—that is, the stated or implied rationales for posited legal rules. These reasons then define the categories of law. The process is an interpretive one, in that only reasons actually accepted by the authors of legal materials qualify as rationales for the purpose of classification.33 A taxonomy that organises legal materials according to the actual rationales of lawmakers typically is taken as normative, that is, the taxonomer intends that the rationales he has identified will not only define the categories of law but also guide future decision-makers. If so, the undertaking may be misconceived. The lawmakers in question may have chosen deliberately to posit limited, determinate rules. They may have assumed, in other words, that determinate rules would coordinate behaviour more effectively than relatively indeterminate rationales, or that future decision-makers would err less often if they simply followed the rules than they would if they attempted to adhere to the rationales behind the rules.34 Alternatively, the authorities may have viewed their own rationales as tentative, and preferred to limit the positive effect of their decision to the terms of a comparatively narrow rule.35

31 See Schauer, n 9 above, 54–5 (discussing the relationship between rules and their justifications). 32 Jaffey refers to this type of classification as ‘justificatory’ classification. Jaffey, n 5 above, 1013–15. 33 On interpretation, see n 17 above and accompanying text. 34 For fuller discussion of the reasons why rule-makers may prefer that rule-subjects obey the rules without considering whether the outcomes of the rules are consistent with the purposes and principles the rules are designed to carry out, see Alexander and Sherwin, n 9 above, 53–95; Schauer, n 9 above, 128–34; L Alexander, ‘The Gap’ (1991) 14 Harvard Journal of Law & Public Policy 695. 35 At least in the context of judicial decisions, explicit or implicit reasons for decision may sometimes operate as posited rules themselves, if they were intended to govern future decision-making and are determinate enough to function as decisional standards. If they were not meant to have the force of rules, they operate simply as rationales, suggestive perhaps but not binding on future courts. Here, too, the process is interpretive: did the precedent court intend to establish a rule?

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In any event, the actual rationales of past decisions are not likely to be a popular basis for legal classification, for several reasons. First, the resulting taxonomy will be incomplete. Judges and legislatures often do not furnish, or even contemplate, rationales that are sufficiently general to serve as the basis for categories of law. Second, it may be difficult or impossible to construct a coherent taxonomic scheme. Rules posited by diverse authorities may be motivated by equally diverse, and often conflicting, rationales.36 A second type of reason-based legal classification would identify morally correct rationales for legal rules. This is, of course, a daunting task, and any single taxonomer’s view of the matter will be highly controversial. Moreover, taxonomy based on ideal rationales suffers from the same difficulty that affects taxonomy based on actual rationales: determinate legal rules may be more effective than more abstract legal principles in guiding actors and adjudicators. Rules can settle controversy, facilitate coordination and prevent reasoning errors in a way that correct but indeterminate rationales cannot.37 Overall, therefore, the legal system may be better off with posited rules, applied without direct reference to the justifying reasons that support them. The third, and most likely, form of reason-based classification of law defines legal categories by reference to the attributed rationales of legal rules. In Ronald Dworkin’s terminology, the taxonomer identifies the legal principles that best explain various legal materials.38 Common legal principles then serve as the criteria for classifying law.39 Dworkin developed the notion of legal principles as a response to legal positivism.40 Courts, he argued, often rely on principles that are not posited rules, but are derived from pre-existing rules and decisions and are themselves part of the law. Specifically, legal principles are the morally best principles that meet a threshold requirement of ‘fit’ with existing legal rules and prior judicial decisions.41 Legal principles are not based on the intentions of prior lawmakers. The decision-makers who first announced the rules and decisions on which a legal principle is based may have had in mind a different principle, or no principle at all. Instead, legal principles are formulated by later judges 36 A further difficulty is that there is very little in it for the taxonomer, whose job is simply to interpret and record the rationales adopted by other decision-makers. 37 See n 35 above and accompanying text. 38 See Dworkin, Law’s Empire, n 15 above, 240–50, 254–8; Dworkin, Taking Rights Seriously, n 15 above, 22–31, 115–18. 39 For a taxonomy of criminal law that follows this model at a high level or generality, see M Moore, Placing Blame: A General Theory of the Criminal Law (Oxford, Clarendon Press, 1997) 3–80 (offering a ‘deep descriptive theory’ of the criminal law) 40 See Dworkin, Taking Rights Seriously, n 15 above, 22. 41 See Dworkin, Law’s Empire, n 15 above, 254–8; Dworkin, Taking Rights Seriously, n 15 above, 115–18.

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presiding over particular disputes. Ideally, the judge studies existing legal materials, formulates a principle or set of principles that meets the twin criteria of fit and moral appeal, and then applies the principle to decide the pending dispute.42 Although legal principles are drawn from existing rules and prior decisions, they are not required to conform perfectly to prior law. Beyond the necessary threshold of fit, flawed rules and precedents can be discarded to achieve the morally best possible principle.43 Thus, assuming that, at any point in time, some number of prior legal rules and decisions will be mistaken, legal principles enable judges to improve on the raw material of existing law. At the same time, legal principles are not ideal principles, because they must satisfy the threshold of fit. A final point about legal principles is that they do not operate as rules, dictating the outcome of cases that fall within their terms. Instead, they have what Dworkin calls a ‘dimension of weight’.44 Different legal principles may compete; when this occurs the presiding judge gives each principle the weight it is due in the context of the case at hand. In a taxomony that classifies law according to common legal principles, the categories of law are necessarily normative: they both express and, if accepted, provide reasons for legal decision-making. Legal principles do not describe the rationales for actual legal rules; nor are they rationales for ideal rules. Instead, they are constructs designed precisely to elaborate and enlarge the normative implications of posited law. A descriptive taxonomy based on legal principles, therefore, would be pointless, if not incoherent. The conclusion that legal principles are inherently normative is consistent with Dworkin’s own analysis. In Dworkin’s picture of law, legal principles are the primary standards for judicial decision-making.45 Moreover, beyond the required threshold of fit, judges are free to ignore recalcitrant rules and decisions. In effect, therefore, Dworkinian legal principles trump posited law. Although a scholarly taxonomy based on legal principles is normative in character and intent, it obviously is not binding on judges. Legal principles are constructed case by case, as part of the process of decisionmaking. Nevertheless, taxonomers may hope that busy judges will adopt See Dworkin, Law’s Empire, n 15 above, 240–50. See Dworkin, ibid, 230–1, 239–50, 255; Dworkin, Taking Rights Seriously, n 15 above, 118–23. Insofar as legal principles must be the morally best principles they can be consistent with the requirement of fit, presumably all flawed materials must be discarded once the threshold is passed. See L Alexander and K Kress, ‘Against Legal Principles’ (1997) 82 Iowa Law Review 739, 756–7; K Kress, ‘Legal Reasoning and Coherence Theories: Dworkin’s Rights Thesis, Retroactivity, and the Linear Order of Decisions’ (1984) 72 California Law Review 369, 380–1. 44 Dworkin, Taking Rights Seriously, n 15 above, 26–7. 45 See ibid, 23–4, 29–39. 42 43

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the off-the-rack principles they offer, particularly when those principles are presented as components of a comprehensive master scheme of law. A classification based on legal principles, and perhaps any form of rule-based classification, is likely to violate the formal rules of classification put forward by Birks. Particular decisions or rules may reflect a combination of principles; therefore the content of legal categories will sometimes overlap. Principles may compete with one another, and their comparative weight may vary according to the context of adjudication; therefore legal categories will sometimes resist hierarchical ordering. As Dagan’s analysis indicates, however, these matters of form are not of serious concern to a taxonomer interested in justifying, rather than describing, law. (v)

Summary

Of the methods of classification listed in this section, formal classification according to rules of taxonomic logic and reason-based classification are the only viable alternatives. In the most plausible form of reason-based classification, the categories of law are defined by ‘legal principles’.

C

The Purposes of Classification

Not surprisingly, both the subject matter and the method of classification depend on the purpose legal classification is assumed to serve. In defending his own taxonomical project, Birks made various suggestions about the ends of legal taxonomy. A proper classificatory scheme, he argued, will promote consistency, ensure that like cases are treated alike, increase legal stability and constrain legal decision-makers.46 It will also impose rationality on the legal system and increase our understanding of the law.47 (i)

Guidance for Courts

Four of the various possible benefits of taxonomy mentioned by Birks—consistency, like treatment, stability and constraint—are qualities associated with legal decision-making, and particularly with decisionmaking by courts. In combination, they suggest a more general purpose for legal classification: to provide standards for adjudication. A sound taxonomy, in other words, can promote even-handed judicial decisionmaking in cases not covered by posited rules, and perhaps can also furnish

46 47

See Birks, ‘Definition and Division’, n 1 above, 34–5; Birks, ‘Equity’, n 1 above, 4–5. See Birks, English Private Law, n 1 above, xlvi, xlviii; Birks, ‘Equity’, n 1 above, 5.

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courts with grounds for avoiding rules or results that appear out of line with the body of law. A taxonomy that aims to guide, improve and stabilise judicial decisionmaking must be reason-based and normative. It must classify legal rules and decisions according to the common reasons that support them. The scheme of classification must also be presented to courts, and accepted by courts, as a source of decisional guidance, independent of the particular laws it classifies. The natural candidate for a normative, decision-guiding taxonomy is a reason-based taxonomy based on Dworkinian legal principles: principles that are abduced from pre-existing rules and decisions and deemed to be the morally best principles consistent with a threshold proportion of those rules and decisions.48 Classification based on legal principles, it might be thought, will promote consistency, like treatment, stability and constraint, in judicial decision-making by enabling courts to reason by analogy.49 Assuming, as I have argued, that courts cannot simply perceive meaningful similarities between past and present cases, legal principles provide the means to identify relevant points of likeness. The threshold requirement of fit means that the principles governing analogical reasoning, and therefore the decisions that result from analogical reasoning, are constrained by the body of pre-existing rules and decisions. A legal taxonomy that identifies the various legal principles immanent in the body of law and assembles them in a coherent scheme will make the decisions of judges who adopt the scheme consistent and stable, over time and across subject matter. In fact, there are several reasons to doubt that a taxonomy based on legal principles will lead to consistency in judicial decision-making. Most obviously, judges are not bound to follow legal principles constructed by a scholarly taxonomer of law. Formulation of legal principles is, in theory, a process of intensive deliberation case by case. In the hands of many individual judges, the principles that result may vary widely. 48 I exclude taxonomy according to correct moral principles for the reasons suggested earlier. There are good reasons why a designer of ideal laws would not wish to make these principles generally available, and would prefer instead that judges and actors follow determinate posited rules. See text accompanying nn. 35 and 37 above. 49 For explanations and defences of analogical reasoning, see Burton, n 19 above, 25–41; Levi, n 19 above, 1–6; Raz, The Authority of Law, n 9 above, 201–6; Sunstein, n 11 above, 62–100; Weinreb, n 19 above; Brewer, n 14 above, 925–9, 962–3 (1996); J Horty, ‘The Result Model of Precedent’ (2004) 10 Legal Theory 19; G Lamond, ‘Do Precedents Create Rules?’ (2005) 11 Legal Theory 1. See also K Llewellyn, The Common Law Tradition: Deciding Appeals (Boston, MA, Little Brown, 1960) 77–87 (discussing ‘the leeways of precedent’); K Llewellyn, The Bramble Bush: On Our Law and Its Study (Dobbs Ferry, NY, Oceana Publishers, 1960) 66–69. For more skeptical views, see, eg Alexander and Sherwin, n 10 above, ch 3 at notes 4–51; Alexander and Sherwin, n 9 above, 125–135; R Posner, The Problems of Jurisprudence (Cambridge, MA, Harvard University Press, 1990) 86–98; Schauer, n 9 above, 183–7; L Alexander, ‘Bad Beginnings’ (1996) 145 University of Pennsylvania Law Review 57, 80–6. See also E Sherwin, ‘A Defense of Analogical Reasoning’ (1999) 66 University of Chicago Law Review 1179 (defending the indirect benefits of a practice of analogical reasoning).

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One source of disunity is the moral dimension of the process: legal principles are the morally best principles that conform to a certain proportion of legal materials. Yet, several different sets of principles—perhaps many different sets—may meet the threshold requirement of fit. In the absence of perfect moral consensus, judges will reach different conclusions about which is the morally superior set. Another potential source of variance is the tightness of fit between legal principles and existing rules and decisions. A requirement that legal principles conform to all pre-existing law would prevent correction of past mistakes, and might result in a nonsensical set of principles.50 Short of perfect fit, however, it is not obvious how much conformity to existing rules and decisions is required, or even how one is to think about the problem. The right degree of fit might depend on the extent to which existing materials, combined with common assumptions about their rationales, have generated public expectations that future legal decisions will follow a certain course. Alternatively, the right degree of fit might depend on a sense of what is required to establish coherence, or to promote the mysterious virtue Dworkin refers to as ‘integrity’ in law.51 At best, these are vague standards that give decision-makers substantial discretion to reject or discard rules and decisions of which they disapprove.52 The requirement of fit is further complicated by the effect of new decisions. New decisions add new material to the existing body of law. As this occurs, the threshold of fit will move, the pressure to conform to older material will decrease, and the morally best allowable set of principles will change accordingly.53 Of course, judges might voluntarily adopt a well-designed taxonomy based on legal principles. Judges are pressed for time and inexpert in many subjects; at the same time, they are likely to feel a professional obligation to reason by analogy from past decisions, at least in the absence of governing rules. If so, a prestigious taxonomy of high-order legal principles standing ready for adoption might command substantial loyalty. If, in addition, the body of law evolves slowly enough that the taxonomer’s principles remain viable over time, unevenness at the point of formulating principles will not be a problem. Still, consistent decision-making may not follow. Recall that legal principles are not rules, providing definitive answers in cases that fall within their terms. Legal principles are general standards of varying 50 See L Alexander, ‘Constrained By Precedent’ (1989) 63 Southern California Law Review 1, 34–7 (outlining potential contradictions in a result-based model of precedent). 51 See Dworkin, Law’s Empire, n 15 above, 225–58. 52 See Dworkin, ibid, 255 (‘different judges will set [the threshold of fit] differently’). See also n 46 and accompanying text above. 53 See Alexander and Kress, n 43 above, 756–7; Kress, n 43 above, 380.

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strength, which judges must weigh in context when they compete.54 This leaves considerable room for variable application even when the principles themselves are widely accepted. Moreover, when courts treat legal principles as operative standards for decision, posited rules cease to determine the outcomes of disputes. Rules are part of the data from which legal principles are drawn, but the process of adjustment entailed in constructing legal principles allows courts to disregard recalcitrant rules, and in any event legal principles, not rules, are the primary locus of law.55 As a consequence, decision-making according to legal principles means loss of the consistency that results from decision-making according to rules. The potential for inconsistent application of principles is exacerbated by the difficulty, if not impossibility, of assigning weight to competing legal principles. Legal principles are not correct moral principles; their content is shaped by the requirement of fit with existing materials, some of which are sure to be mistakes. Thus, when legal principles conflict, the question for the judge is what moral weight to assign to principles that are, by hypothesis, morally flawed. Correct moral principles cannot provide the answer, because the question itself makes no moral sense.56 A further consideration is that, to the extent that legal principles do produce consistent decision-making, consistency comes at a cost. Because legal principles incorporate errors in the body of existing rules and decisions, the set of decisions they yield will be inferior to the set of decisions that would result from correct moral reasoning. A similar criticism can be made of any legal rule: rules are imperfect instantiations of the principles and purposes they are designed to implement; therefore they will sometimes produce results that are mistaken when judged in comparison to perfect reasoning according to those principles and purposes.57 Yet, given the vagaries that affect the definition and application of legal principles, determinate rules are much more likely than legal principles to provide settlement, coordination, and constraint.58 Given the imperfection of actual human decision-making, this can more than compensate for the errors entrenched in rules. In contrast, legal principles replicate error but lack the capacity of rules to coordinate and See Dworkin, Taking Rights Seriously, n 15 above, 26–7. See n 43 and accompanying text, above. See Alexander and Kress, n 43 above, 761–4. See Schauer, n 7 above, 31–4, 48–54. See Alexander and Sherwin, n 9 above, 13–15; Schauer, n 7 above, 137–66. On the coordination value of rules, see, eg T Campbell, The Legal Theory of Ethical Positivism (Aldershot, Dartmouth Publishing, 1996) 6, 50, 53, 58; H Hurd, Moral Combat (Cambridge, Cambridge University Press, 1999) 214–21; Raz, The Authority of Law, n 9 above, 49–50; G Postema, ‘Coordination and Convention at the Foundation of Law’ (1982) 11 Journal of Legal Studies 165, 172–86. 54 55 56 57 58

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protect expectations.59 Accordingly, a legal taxonomy that classifies non-ideal law on the basis of common legal principles will have at best a modest effect on the consistency and stability of judicial decision-making, at the risk of perpetuating error. Whatever contribution a taxonomy of legal principles may make to consistency, like treatment, stability and constraint in adjudication, a formal taxonomy does not serve these ends. Formal legal categories are neither intended to guide, nor capable of guiding, judicial decision-making: they are normatively inert. It might be thought that any sorting of law into classes will facilitate analogical reasoning, by capturing potential similarities among cases. As I have noted, however, analogies are meaningless without the assistance of some general justifying principle that identifies similarities as relevant or irrelevant to the outcome of a dispute.60 Analogies can be based on correct moral principles or (for better or worse) on legal principles; but without the support of a principle of some kind, they are intuitive, inaccessible to reason and perhaps incoherent. The purpose of formal taxonomy, therefore, cannot be to guide judicial decision-making in the absence of posited rules. (ii) Facilitating Legal Communication Birks also maintained that legal classification rationalises law and contributes to legal knowledge.61 These are rather vague objectives, but they suggest the more concrete possibility that organisation of law into categories will facilitate legal analysis and communication of legal ideas. In other words, a comprehensive formal classification of law provides a vocabulary and grammar that can make law more accessible and understandable to those who must use and apply it.62 It assembles legal materials in a way that allows observers to view the law as a whole law.63 This in turn makes it easier for lawyers to argue effectively about the normative aspects of law, for judges to explain their decisions, and for actors to coordinate their activities in response to law. Viewed in this way, legal classification is more akin to linguistic taxonomy than to taxonomy in the natural sciences. We sort words into categories—verbs, nouns, adverbs—to help us coordinate our use of 59 See L Alexander and M Bayles, ‘Hercules or Proteus: The Many Theses of Ronald Dworkin’ (1980) 5 Social Theory and Practice 267, 271–8; Alexander and Kress, n 43 above, 753–4. 60 See n 20 and accompanying text above. 61 See, eg Birks, English Private Law, n 1 above, xlviii. 62 Birks spoke somewhat derisively of information storage, suggesting that the best tool for storage is alphabetisation: ibid, xlviii. But in fact, information storage in quite important, and a sensible classification scheme makes it much easier to store and retrieve legal information. 63 Along these lines, Birks said: ‘Without such a map of the law . . . it will be . . . impossible to pass the mind’s eye over the many different locations in which difficult facts might fit.’

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language, think more clearly and improve our grasp of the subject matter we reflect on and discuss. Of course, language is purely conventional, while legal rules are supposed not merely to establish conventions but to establish the conventions that will best serve social ends and protect shared values.64 Legal taxonomy, however, can be understood as concerned primarily with the conventional aspects of law rather than its moral virtue. Taxonomy, on this view, is a tool for critical analysis of law, not the conclusion of critical analysis. Facilitating legal thought and communication is a modest objective for taxonomy, consistent with a formal rather than justificatory method of classification. In a formal classificatory scheme, the categories of law are not designed to furnish rationales for decision-making. Overall, the scheme aspires to order, clarity and descriptive accuracy, and remains indifferent to the normative content of the law. It contributes only indirectly to judicial decision-making, providing judges with an enhanced vocabulary and a frame of reference for ordering their thoughts, but not with standards for decision. (iii) Summary There are two primary reasons for undertaking a taxonomy of law, which shape the enterprise of legal classification in substantially different ways. First, legal classification may be conceived of as a guide for common law decision-making. Assuming the starting point for taxonomy is existing rather than ideal law, the taxonomer’s task is to formulate a set of legal principles, meaning the morally best principles consistent with a threshold proportion of existing law. Legal materials are classified according to the legal principles they represent, and these principles in turn serve as standards for analogical decision-making in new cases and for distinguishing otherwise applicable rules. Given the active role of the taxonomer in formulating legal principles, there is no reason why the subject matter of classification should be limited to posited rules. Consistent with the enterprise, the taxonomer can define his or her raw material as including attributed as well as intended rules. Second, and more modestly, legal classification can be conceived of as a means of increasing our understanding of law and facilitating legal communication. Taxonomy helps those who use and apply law to understand and debate the law by providing a common vocabulary and grammar for law. This type of taxonomy is formal rather than reason-based: classification conforms to taxonomic rules more or less 64 See Alexander and Sherwin, n 9 above, 11–15 (discussing the settlement function of law and the importance of lawmaker expertise in realising shared values); Raz, The Authority of Law, n 9 above, 70–80 (discussing the ‘normal justification of rules’).

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similar to the rules proposed by Birks. Identification of legal categories is informed by basic assumptions about the functions of a legal system, but legal categories do not themselves track or establish normative principles. In a normatively passive taxonomy of this kind, the natural choice of subject matter is actual legal rules, interpreted in light of the intentions of the authorities who posited them. To American scholars, the first form of taxonomy—a reason-based taxonomy designed to influence judicial decision-making—is familiar and attractive. It forms a part, if not the whole, of many secondary legal materials.65 Formal classification seems passive and uncreative. Labouring to avoid an overlap between categories seems comparatively unambitious. Reason-based classification contributes purposively to the development of law: it promises to make law not just clearer but better. I have suggested, however, that the supposed benefits of a reason-based classification, and particularly a classification based on legal principles, may be illusory. Legal principles invite judges to decide cases according to norms that are both vague and imperfect. They may also lead judges to proceed less cautiously than they might if they understood themselves to be acting on their own best moral judgment.

II

B I R K S ’ S TAX O N O M Y

Birks’s taxonomy of law, adopted from the Institutes of Justinian,66 is a formal one.67 Birks did not expound legal principles; in fact, he expressly disavowed a correspondence between the legal categories he proposed and the normative content of law. Thus, for example, he maintained that unjust enrichment, as a class of causative events for legal claims, is a descriptive category rather than a decisional principle on which courts should rely in granting relief: 65 For example, the typical format of the American Law Institute’s Restatements combines ‘black letter’ sections that set forth posited rules, or what I have called attributed legal rules, with comments that identify more general principles drawn from the rules. See, eg Restatement (Second) of Contracts, ch 6, Introductory Note (explaining that ‘the law of contracts supports the finality of transactions lest legitimate expectations be disappointed’, subject, however, to ‘the notion of unexpected extreme hardship’ and ‘the notion of an unexpected material imbalance in the exchange’). The black letter sections themselves may also state what appear to be legal principles. See Restatement of Restitution (1937) §1 (‘A person who has been unjustly enriched at the expense of another is required to make restitution to the other.’) Cf Restatement (Third) of Restitution §1 and comment b (Discussion Draft 2000) (stating that ‘[a] person who is unjustly enriched at the expense of another is liable in restitution to the other’, but suggesting in comments that the black letter statement should not be taken as an operative standard for decision). 66 See Birks, English Private Law, n 1 above, xliv–xlvi; Birks, ‘Definition and Division’, n 1 above, 4–14. 67 Jaffey concurs: see Jaffey, n 5 above, 1017–18.

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Nobody any longer thinks that the law of unjust enrichment, any more than the law of civil wrongs, beckons judges to redistribute wealth other than in accordance with existing law.68

Birks’s insistence that legal categories must not overlap further confirms the formal character of his classificatory scheme. For example, Birks argued strenuously that the category of unjust enrichment must not include enrichment derived from legal wrongs.69 To anyone focused on normative commonality, separate treatment of ‘unjust’ and ‘wrongful’ enrichments seems odd. Birks’s primary concern, however, was not normative commonality but the logical disorder of overlapping causal events. At times, Birks appeared to stray into normative territory. As I have mentioned, a number of the benefits he claimed would follow from sound taxonomy—consistency, like treatment, stability and constraint—are possible only when taxonomy functions as a guide to decision-making. To guide decision-making, legal classification must sort law according to common justifying reasons that have normative implications for future cases. Birks’s discussion of unjust enrichment also hints at normative aspirations. Birks suggested that the category of unjust enrichment pointed courts to a series of questions that would help to resolve cases: (i) Was the defendant enriched? (ii) Was it at the expense of this claimaint? (iii) Was it unjust? (iv) What kind of right did the claimant acquire? (v) Does the defendant have a defense? . . . The first three questions show that an unjust enrichment has happened and they thus establish a cause of action.70

Although Birks made it clear that, in answering these questions, courts should refer to established law and not to unjust enrichment as an abstract norm,71 he appeared also to contemplate that courts would ask his questions in comparing cases and ‘fine tuning’ the law.72 Here, Birks appears to have fallen into the trap of assuming that courts can draw analogies based on likeness between cases, without support from a justifying principle that identifies relevant similarities. I have argued that this assumption is mistaken.73 Unjust enrichment is either a normative principle that supports judicial relief in new kinds of disputes (‘grant relief if the defendant has been unjustly enriched’) or it is merely a descriptive category encompassing a set of causative events recognised by law, without normative import. There is no middle ground between these two possibilities. 68 69 70 71 72 73

Birks, ‘Definition and Division’, n 1 above, 21. See n 25 and accompanying text above. Birks, Unjust Enrichment, n 1 above, 34. See n 72 and accompanying text above. See Birks, Unjust Enrichment, n 1 above, 35. See n 20 and accompanying text above.

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My own analysis of reason-based classification suggests that Birks’s initial instincts about legal taxonomy—that it should remain descriptive and avoid normative content—were correct. I have my doubts about some of the specific formal rules Birks espoused, such as the rule that categories must not overlap. But, in general, formal taxonomy in the style Birks defended is a useful contribution to the clarity of law. Formal taxonomy does not advance the other ends Birks hoped to achieve: consistency, stability and constraint in judicial decision-making. A code of determinate legal rules might serve these objectives, but only if the code itself, and not the principles that support it, is the source of normative guidance for courts. In any event, Birks had no taste for codification.74 A normative reason-based taxonomy, and particularly a taxonomy that classifies on the basis of legal principles, aims at consistency but is likely to miss. Legal principles do not constrain authoritatively, in the manner of codes. Quite the opposite: classification based on legal principles invites judges to decide cases by reference to indeterminate norms that create the illusion of decision according to established law. To the extent that legal principles do constrain in fact, they may lead judges into error. When they fail to constrain, their supposed connection to existing law may increase the confidence with which judges decide as they see fit.

III

TAX O N O M Y AN D L E G A L P O S I T I V I S M

Hanoch Dagan associates formal, descriptive taxonomy with legal positivism.75 I believe this association is correct. The connection between them, however, requires some explanation. For present purposes, I shall ignore the theoretical fine points of legal positivism and assume that, for a positivist, law consists of rules posited by authoritative sources.76 In cases not governed by posited rules, no law applies and judges must exercise their best judgment, all things considered, to resolve the cases that come before them.77 That is to say, they must engage in moral and empirical reasoning, seeking wide reflective equilibrium between initial judgments and plausible justifying principles.78 74 See, eg Birks, ‘Equity’, n 1 above, 99 (‘The challenge, therefore, is to defend the common law against the politicising post-realists and the insufficiently humble codifiers.’) 75 See Dagan, n 5 above. 76 See generally Hart, n 12 above, 77–107. 77 See generally ibid, 121–33. 78 Wide reflective equilibrium is the method of moral reasoning described by John Rawls, in which the reasoner tests a tentative moral principle against moral judgments about the correct

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In this view of law, there is no room for legal principles. The posited rules that make up law may include legislation and rules announced in judicial opinions, explicit rules and rules implicit in the explanations given for judicial decisions, and rules of varying degrees of generality and determinacy. They must, however, be intended to operate as rules for future decision-making, by authors recognised as authoritative within the legal system. Legal principles are not posited rules: they are norms abduced case by case from the data of prior decisions and pre-existing rules, and used to support analogical decision-making in cases not covered by rules. Nor are legal principles correct moral principles of the type that positivist judges apply in the absence of rules: they are imperfect legal principles drawn from the body of legal materials in place at the time.79 On a positivist understanding of law, therefore, a taxonomy of law that sorts legal materials according to common legal principles is of no use in guiding the decisions of courts. Setting aside the possibility of a normative taxonomy appended to ideal legal rules, it follows that, for a positivist, legal classification is a descriptive enterprise. Its function is not to influence future decisionmaking but only to enrich the vocabulary of law and facilitate legal communication. Formal taxonomy, however, has significant benefits from a positivist point of view. Better communication means easier access to the rules, better-informed debates about their application and more effective criticism of rules that appear misguided from a moral point of view.80 Formal taxonomy may also be helpful in the absence of posited rules. When no rule applies, the positivist judge must exercise moral judgement to decide the case at hand. In a legal system that recognises common law rules as binding precedents, the judge may also act as rule-maker for future outcome in particular instances within its scope. See J Rawls, A Theory of Justice (Cambridge MA, Belknap Press, 1971) 14–21, 43–53, 578–82; J Rawls, ‘Outline of a Decision Procedure for Ethics’ (1951) 60 The Philosophical Review 177. The reasoner continues to adjust both the tentative principle and his or her more particular judges, and also to seek independent confirmation from accepted background theories about the world, until an equilibrium is reached. As a method of justifying action or decisions, reasoning to wide reflective equilibrium is open to some devastating logical criticisms, but it is probably the best option we have. For an explanation and defence of the method of reasoning to wide reflective equilibrium, see N Daniels, ‘Wide Reflective Equilibrium and Theory Acceptance’ (1979) 76 Journal of Philosophy 256. For criticism, see, eg D Haslett, ‘What is Wrong with Reflective Equilibria?’ (1987) 37 The Philosophical Quarterly 305. See nn. 41–3 above. Nothing in legal positivism dictates that judges must follow posited rules. The obligations of judges in regard to rules is a question of authority, and the system may well confer authority on judges to overrule prior rules and announced new ones. See Alexander and Sherwin, n 9 above, 151–6; Alexander and Sherwin, n 10 above, ch 2, text at notes 65–8; Eisenberg, n 20 above, 104–5. Whether and in what circumstances judges should have these powers is, of course, a difficult question. 79 80

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cases—a role that similarly calls for moral judgement.81 In either case, prior decisions and ‘analogous’ rules do not constrain the judge’s moral reasoning. Yet, a review of prior decisions may provide judges with concrete examples for use in testing tentative decisional rules, and in this way assist the process of reasoning to reflective equilibrium. A formal taxonomy that sorts prior decisions according to recurring features of disputes can direct judges to decisions that might be useful for this purpose. To make use of a legal taxonomy in this way, the judge may need to rely on intuitive, or incompletely reasoned, judgment of similarity. In this context, however, the dangers of intuitive analogising are minimal. The purpose of the analogy is not to determine the outcome of the present case, but only to locate raw material for moral reasoning.82 In formulating the decisional rule that will ultimately decide the case, the judge is free to ignore prior decisions that appear on reflection to be morally unlike the case at hand, or morally wrong. The deciding judge retains full responsibility and, importantly, a sense of full responsibility for the outcome of the dispute. Thus, formal taxonomy of the kind espoused by Birks is consistent with legal positivism, and may be useful from a positivist point of view. In contrast, a reason-based taxonomy, designed to guide and constrain judicial decision-making, runs contrary to the positivist assumption that only authoritative rules have the status of law.

IV

CONCLUSION

I have identified two primary methods of legal classification: formal classification and reason-based classification. Formal classification is modest in its aims, helping to clarify the law and facilitate legal communication. It does not purport to present courts with standards for decision. Reason-based classification, at least in its normative versions, claims the more ambitious purpose of guiding, and improving the quality of, judicial decision-making. In fact, however, a project of reason-based taxonomy is unlikely to promote judicial virtues of consistency, stability and constraint. A taxonomy assembling the higher-order principles that explain and support an ideal code of legal rules can be useful from a law-making perspective, but may do more harm than good if presented as a source of 81 On the difficulties affecting judicial reasoning when judges act as rule-makers, see F Schauer, ‘Do Cases Make Bad Law?’ (2006) 73 University of Chicago Law Review 883; E Sherwin, ‘Judges as Rulemakers’ (2006) 73 University of Chicago Law Review 919; J Rachlinski, ‘Bottom-up and Top-down Lawmaking’ (2006) 73 University of Chicago Law Review 933. 82 See Alexander, n 50 above, 66–8 (explaining the differences between analogical reasoning in law and reasoning to reflective equilibrium).

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guidance for judges. Reference to higher-order principles diminishes the settlement value of rules and may result, on average, in more erroneous decisions. A taxonomy assembling legal principles drawn from existing legal materials is a confused enterprise. This type of taxonomy is designed to guide decision-making but in fact leaves ample room for unconstrained and inconsistent application of principles. To the extent it does constrain, it constrains judges to construct and apply morally imperfect legal principles rather than correct moral principles in deciding cases.

7 Restitution and the Discourse of System RES TI TUTI ON AND THE DI S COURS E OF S YS TEM

R IC H A R D S U T T O N * RI CHARD S UTTON

M

Y MEMORY OF Peter Birks goes back to 1973, when I was on sabbatical leave in Oxford. As a guest of the Law Faculty in Oxford, I had the privilege of attending a series of BCL seminars on Restitution. My own acquaintance with the subject had been forged in a New Zealand and American context, and this was a new encounter altogether. The combination of the distinctive Oxford pedagogical style, and the opportunity to work with a group of newly found friends who shared a common enthusiasm for the subject, was a rare experience which resonates with me to this day. There were friendly discords too, which I have struggled with throughout my academic career. Peter Birks was one of the leaders of the seminar that year. As have many others before and after me, I have valued beyond measure his friendship and gentle collegiality in the ensuing years. When his seminal An Introduction to the Law of Restitution1 was first published in 1985, I spent many hours with it. Clearly it was an immensely important work, the product of fearless intellectual endeavour and profound insight. No wonder that it was to have such a significant impact on academic thinking in England and the Commonwealth. And it in turn owed much to the years of challenge in the academic debates that preceded its publication. Yet I still felt a sense of disquiet about the way the author had gone about his task. I could not name it, still less formulate any useful counterargument or alternative approach (as Birks so frequently challenged us to * Faculty of Law, University of Otago. I am very grateful to my colleagues Michael Robertson and Struan Scott, who read and commented most helpfully on an earlier draft. I am particularly indebted to the former for drawing my attention to the material referred to in note 22. I am also indebted to a small interdisciplinary group of scholars at Otago, convened by Wes Sandle and led by Grant Gillett, and of which I am a member. They challenged me to conceive, and their gentle skepticism led me to tease out, the idea which now appears as the two diagrams in Part II of this essay. 1 P Birks, An Introduction to the Law of Restitution (Oxford, Oxford University Press, 1985) (hereafter ‘Introduction’).

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do). The debates that have, for the last 20 years, surrounded the book and Birks’s efforts first to defend, and then later to recast, its fundamental propositions did nothing to allay my foundational unease. But I simply did not have the language to express it. Clearly I am a slow learner. Just recently, I have begun to learn a language and approach which provides a register in which my disquiet can be inscribed. It is a language in which symbols, metaphors and images— and the words which stand in for them—play an important role in legal thinking. It is not, I hasten to assure you, a way of describing a mythical, religious or mystical world, though sometimes the law will draw images from that quarter. On the contrary, the images I refer to still have a defined and purposeful role within a secular legal system. They provide us with a sense of space, direction and flow in legal thinking. Most importantly for what follows, they relate to the dynamic, processual part of what is to be found in Birks’s legal writing, as opposed to its static and taxonomic features,2 which were to occupy much of Birks’s attention.3 Tensions are beginning to appear between the two. The dynamic view appears to be directing us down a path where location and direction are more important than definition and meaning. My thesis will be that, in the longer term, the dynamic aspect of Birks’s thinking may prove just as significant as the mechanics of the taxonomical analysis of unjust enrichment. It may possibly prove to be even more enduring. My thesis takes me back once more to the introduction and the first four chapters of Birks’s seminal work. I have asked myself a new set of questions. The result has surprised me. For the first time, I have had a sense of empathy and understanding with what was going on—a new dimension of legal thought opened up before me. ‘But of course’, you might say, ‘the penny’s dropped with the poor old fellow after all these years; the rest of us figured it all out in the 1980s.’ That may well be so, but I have seen very little discussion along these lines in the restitutionary debates which have raged, and continue to rage, in the intervening period. One can read much about taxonomical issues, such as ‘Is this a restitutionary right or a property right?’ ‘Is it unjust enrichment or wrongs/contracts/other?’ ‘In this particular rule, is the 2 Birks would describe the whole process as mapping ‘by metaphor’: see P Birks, Unjust Enrichment (Oxford, Clarendon, 2nd edn, 2005) 20. 3 See also P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 University of Western Australia Law Review 1, 1–22, for a seeming fusion of the processes of map-making and classification. But these are different things. Certainly maps can show the results of classification (for example, a map of the Health Districts in New Zealand). But they do not necessarily depend on classification (except in the trivial sense of having to distinguish between land and water). The ancient English map on which the words ‘Here be wolves’ appeared, for example, served a useful purpose, without a strict definition of what counted as a wolf, or a precise delineation of the area where wolves were likely to be encountered.

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“unjust” a plaintiff-sided or defendant-sided “unjust?”’4 One hears much less about the fundamental processes of legal thinking which throw up these issues. So what do the opening pages of the Introduction have to offer, that we may have neglected in our search for meaning and definition? This is no mere historical curiosity. The ideas Birks expressed on these matters in the Introduction stayed with him, and are repeated—albeit with less prominence—in its recent successor, Unjust Enrichment, published in 2003.5 Though he appears not to have developed them much beyond what is said in the Introduction, they are, I believe, crucial to his methods of enquiry.6 In this essay I propose: • To relate what I have to say to the author’s purpose in writing the Introduction (Part I). • To describe, analyse and develop the dynamic view he advances in the early chapters of that work (Parts II and III). • To test the present state of the taxonomy of the law of unjust enrichment against the criteria the author himself offers as a part of his dynamic view (Part IV). • To offer a different approach to ‘mapping’ the law of obligations, based on the author’s dynamic view rather than his taxonomical view (Part V).

I

T HE AUTHOR’S PURPOSE

It is a well-known fallacy to continue blindly on a path long after one has forgotten the reason for embarking on it in the first place. The ‘Introduction’ to the Introduction gives us no excuse for that. The book’s purpose for the law of unjust enrichment is made perfectly clear. Unlike the law of contracts and the law of torts, the law of unjust enrichment has no ‘skeleton’ or shape, and it must be given one.7 Let us think back to 1985, when the law of restitution had only one English text, and there were few other texts in the British Commonwealth. There was no consensus about restitution’s shape. The Introduction was designed to fill that void. There was at that time a need for ‘a simple, even an oversimplified account’8 to establish a sufficient basis for a coherent system to be developed. This would be at first largely ‘descriptive’. The 4 The general tendency towards the detail of taxonomy, is naturally reflected in Part I of the British memorial to Birks’s work, A Burrows and A Roger (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006). 5 Birks, n 2 above. The last part of Unjust Enrichment, however, reverts to topics discussed in the early chapters of the Introduction. 6 See below, nn 27, 33, 44 and 60, and accompanying text. 7 Birks, n 1 above, 1. 8 Ibid, 1.

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description would not be set in stone; it would need to be kept under ‘constant critical review’.9 So, over time, there would be an iterative process, that is to say, information would pass between the decided case law and the skeletal structure, adjustments being made accordingly, commonsense being brought into line with legal decision and vice versa. Later on, when the subject reached the same stage as the law of contract or torts, the balance would shift away from the ‘descriptive’ towards the ‘critical’.10 On what basis is the ‘skeleton’ proposed? In the first instance, it is the ‘commonsense’ of the matter. In an untheorised state, cases reflect much too confused a pattern, shaped by the opportunism of adversarial litigation, to provide a sound basis for further enquiry. So a skeleton must be devised. It is ‘not just the commonsense behind a legal topic but rather a particular organization of its commonsense, a version chosen from a number of possibilities’.11 The agent who makes that choice, ‘describing and defending the anatomy of legal subjects’, is not the judge but the textbook writer.12 ‘In the law’, it is proclaimed, ‘this is the age of the textbook.’13 It is through successive editions of numerous texts that an evolutionary process occurs, leading to a consensus among the textwriters, while the cases ‘confirm and reflect back the framework selected as the best-fitted to the subject’.14 The process involves the selection of a ‘central concern’—here, the idea of restitution or unjust enrichment 15—adding the few ‘most important points’ which aid the study of that concept.16 Inessentials which add nothing to the substance, legal fictions, and unnecessary and unexplained analogies are all to be ignored.17 So too are matters which relate to the social context in which legal problems arise, rather than the legal issues themselves.18 The facts of history—here the mass of decided cases which might be associated with a new law of restitution—are reduced to a manageable handful of concepts, selected with a distinct purpose in view. That purpose is to generate ‘a stable set of large questions capable of breaking all problems down into instantly recognizable phases’.19 These 9 Ibid. 10 Ibid, 11 Ibid. 12 Ibid, 13 Ibid, 14 Ibid, 15 Ibid,

1.

1–2. 2. 2. 3. Latterly, Birks drew a sharper distinction between ‘restitution’ (the response to a legal claim) and ‘unjust enrichment’ (the legal cause of, or trigger for, that response), than he might have appeared to do in 1985, but it quickly emerges in the Introduction: Birks, ibid, 16. 16 Ibid, 6. 17 Ibid 7, 22, 75, 87. Cf 91, where it is necessary to add a new concept, for similar reasons of clear exposition. 18 Ibid, 74 19 Ibid, 7.

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inform a wider vision of the possible problems as a whole, a ‘map of the relatively unknown land beyond the now familiar contract and tort’.20 The landscape ceases to be cluttered by the many other questions and issues thrown up in the case law. Birks’s spatial imagery is important. His ‘mapping’ metaphor recurs in many of his writings.

II

A N I M P L I C I T S H A P E TO L E G A L R E A S O N I N G

I want now to reflect on the shape that Birks, in these few pages, has implicitly given to the process of legal reasoning itself, rather than the subject of unjust enrichment. Untutored by academic commentary, we might perhaps have thought of legal reasoning as a single line (Figure 1).

Fig. 1

It begins with the ‘actual’, that is, the mass of particular orders and rulings that have been given in the case law which is relevant to our jurisdiction. As a result of reading that material, in a spirit of good faith to the intentions of judges and legislators who produced it, we are able to give this mass ‘meaning’. That is to say, we condense it into a form which is reasonably generalised, so that it can be applied to future cases. Those of us who are text-writers will then seek to generalise these meanings at a higher level, and sort them out as attractively as we can without either addition or subtraction. But that is exactly the picture that Birks instructs us to discard. He warns us, Someone might say that, since a ‘skeleton of principle’ is no more than a metaphor for the commonsense behind the law’s technical detail, a concise account of it can always be given, whatever the state of the literature or the cases in the field.21

But there is a snag in such an argument, he says. It omits the vital role of the text-writer in proposing the basic scheme of the subject, its rudimentary ‘anatomy’ which the case law will draw from, reflect and refine over time. Now clearly this is a controversial claim which some judges and scholars will vigorously rebut. On one view, it gives a jumped-up role to 20 21

Ibid, 10. Ibid, 1.

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the academic branch of the legal profession. But such ad hominem arguments are hardly worthy of debate. Anyway, judges themselves often write, or preside over the collation of, significant legal texts, as well as issuing authoritative judgments. The question raised here is a much more subtle one. Suppose we want to have a coherent and comprehensible legal system. To achieve that end, someone—whether a judge, an academic or a team of lawyers engaged by a publisher—has to put the material into an abstract form. And if that endeavour is to succeed, whoever does it has to bring a creative spark of his or her own to the enterprise. Merely abstracting the material in a purely neutral, value-free way is not going to work. Neither does the picture of the simple line work. It implies that the judges in their capacity as authors of case law are the initiators, and everyone else plays an incidental or subservient role. The reality of our system is different. Text-writers play a role that judges cannot dictate or take away from them. So too do those whose task it is to give meaning to the prior case law—lawyers and judges involved in trying a later case, for example, or academics writing an article about a series of decisions. In our minds (because Birks does not do it for us) we must redraw the diagram so as to reflect our view that the contributions of each activity are coequal and incommensurable (Figure 2).

Fig. 2

It is worthwhile spending a little time discussing the implications of this change. There are two or three which are worth mentioning now. They quickly take us into some serious analysis. The first and most important implication is that we have converted the process from a single line of common discourse to a situation where there are three contexts for our discourse, each autonomous and with its own

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presuppositions. How we use line B, the language of decision-making and law declaring, and line C, the language of legal interpretation, is of course well known and needs no further description here. But A, the independent context of legal systematisation, and its presuppositions and ambitions, are relatively novel in legal literature. As we will see presently, Birks has a great deal to tell us about what they are. The second implication is that, as Figure 2 shows, there is a different way of moving from one context to the other. It is no longer purely linear but has become iterative and circular. It is a series of repetitions around a self-contained system. These pass back and forth between the case law and the textbook generalisation, before any particular group of laws assumes its optimal, most evolved form. In the three-sided diagram, the arrows show an ordered flow. Movement can begin anywhere, but the natural tendency—in an area of law with settled generalities—is to move from the case law (line B) on to giving it meaning (line C), and finally on to fitting the more important clusters of meanings into the broad systematisation (line A). Over time, the incoming case will be considered exclusively in those terms. No other view of it will be considered ‘possible’. For example, when a case of alleged obligation appears before a court, it will in English law generally be seen as a case of contract, unjust enrichment or tort. Stanley Fish, who has developed important theories about the process of giving meaning to texts, put the matter in this way:22 Indeed, it is interpretive communities, rather than either the text or the reader, that produce meanings and are responsible for the emergence of formal features. Interpretive communities are made up of those who share interpretive strategies not for reading but for writing texts, for constituting their properties. In other words these strategies exist prior to the act of reading and therefore determine the shape of what is read rather than, as is usually assumed, the other way around.

Hence the general descriptor I have given to line A—the discourse of the ‘possible’. At this point we may well ask what the standing is of lines A, B and C. Concepts borrowed from a branch of the discipline known as semiotics, particularly the idea of a ‘register’ of discourse, help us here. Semiotics deals with the nature and context of human speech and writing.23 The 22 S Fish, Is There a Text in This Class? The Authority of Interpretive Communities (Cambridge, MA, Harvard University Press, 1980) 14. Fish shows that the ‘constituting’ function is independent of, and prior to, the process of giving a text meaning, and it influences the latter process in a fundamental way. M Halliday, Language as Social Semiotic (London, Edward Arnold, 1978) 61, expresses the same thing more succinctly: ‘a text is meaningful not so much because the hearer does not know what the speaker is going to say . . . but because he does know.’ 23 Semiotics studies the words and symbols (signifiers) that are used in speech. Because language is a social product, questions about the ‘things’ the signifiers are supposed to point to

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social expectations of the discourse can be related to its context, which can be analysed in three respects: 1. the ‘field’ of the discourse, that is, what it is about, its institutional setting—here, statements about what the law is; 2. the ‘tenor’ of the discourse, that is to say, the standing of each person to take part in the discourse—here, lawyers, judges and legal academics—and what is expected of them; and 3. the ‘mode’ of the discourse, that is, its specific direction. A ‘register’ can be attached to discourse, where analysis shows that the social context is distinct in any one of these respects.24 By convention, only certain types of statement or discussion are appropriately inscribed in each register. Looking at the diagram, we can see that all three sides will have more or less the same field and the same tenor of discourse, but the mode of discourse on each of the sides is different. So we can expect to find, and do find, distinct ‘registers’ of speech for each side of the triangle. There is a third implication from all of this, which I do not propose to do more than touch on in this essay. The transition from one register of discourse to another has at least potential problems. Each register is of coequal importance. Each says something different, and no one is necessarily subservient to any other. Yet they are intimately bound together. Describing each register of the discourse may be much easier than providing an adequate account of the influence the discourse in one register may have on the discourse in the other two.25 The logical next step will be to look at the distinctive content of the mode of discourse of the ‘possible’ or the ‘systematic’, and offer some thoughts on how the present taxonomy of the law stacks up against the criteria offered in the Introduction. However, we must first clear away some problems and resistances to the analysis I have proposed.

or represent (the signified) are often better considered as questions about how words are used in discourse. They are understood by reference to their relationship with (and difference from) other words, which is something internal to the language system. See generally J Culler, Saussure (London, Fontana Press, 1985). 24 Halliday, n 22 above, 33 and ch 3. In applying this to legal discourse in the way that I have, I am assuming that each mode of discourse I describe is governed by practices that are recognized, or are becoming recognized, in the relevant legal interpretive community. 25 I would not at this stage make the same assumption as in the previous note about the way in which speakers move from one mode of discourse to another. It may perhaps be subjective and idiosyncratic to the individual speaker. Birks himself gives some credence to this view when he argues that the word ‘unjust’ (in ‘unjust enrichment’) should be retained to allow the law to retain a degree of creativity and self-criticism: Birks, n 2 above, 274–5.

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S O M E P RO B L E M S W I T H T H E D I S C O U RS E O F T H E ‘POSSIBLE’

Much water, and many academic writings, have passed under the bridge since Birks wrote his Introduction. I imagine that there will be some followers of the tradition he instituted who will find what I have just said unfamiliar, and will think it a totally unwarranted personal extrapolation from the writings of one who always treated case law with great care and respect, firmly distinguishing between the law as it is and the law as it might be in a more orderly world. The only response I can give is to encourage such people to go back and read the Preface and the early chapters of the Introduction for themselves. They will wish to reflect upon such statements as:26 Here, however, the scheme has sometimes to be forced on to cases which themselves perceived it, if at all, intuitively. According to the thesis of this introduction, the successful implementation of an ultimately acceptable framework cannot begin, and certainly cannot be found in the cases, until versions which may be fragile and idiosyncratic have been thrown into the ring. Until textbooks have taken a grip of the material it is actually anti-rational to be too fastidious.

They will also ponder Chapter 1, which opens with the statement ‘Children quickly learn that if they give their toys away they cannot expect to get them back’,27 and ends with a very precise definition of the law of unjust enrichment, in a form which the author calls a ‘generic conception’. No judicial statements are relied on at all, and such reported cases as are referred to are given simply as examples which accord with the different steps taken to build up the definition. They will notice that hallowed concepts, such as the notion of the ‘implied contract’, ‘quasi-contract’ and the ‘constructive trust’, are swiftly despatched from the ring as useless and unhelpful.28 They will see how more time is devoted to Roman law29 and to classic English historical landmarks30 than to any case of current authority.31 26 Birks, n 1 above, 4 (my italics). Cf P Birks, ‘Unjust Enrichment—a Reply to Mr Hedley’ (1985) 5 Legal Studies 67, 76; P Birks, ‘The Independence of Restitutionary Causes of Action’ (1991) 16 University of Queensland Law Journal 1, 2–5. 27 Compare Birks, n 2 above, ch 1, which starts things off in a much more legal way, postponing much of the discussion of systematics to the last chapters of the work. 28 Birks, n 1 above, 4–5, 33, 56. 29 Ibid, 29–31. For a fuller discussion relating civilian law to English legal history, see P Birks and G McLeod, ‘The Implied Contract Theory of Quasi Contract: Civilian Opinion Current in the Century Before Blackstone’ (1986) 6 Oxford Journal of Legal Studies 46, 46–47. 30 For example, Birks, n 1 above, 35–3 (discussing Slade’s Case (1602) 4 Coke Rep 91) 36 (discussing Moses v Macferlan (1760) 2 Burr 1005) and 78–81 (discussing the history of the action of indebitatus assumpsit). 31 A more conventional legal treatment might, for example, have built its reasoning out from statements in House of Lords cases such as United Australia Ltd v Barclays Bank Ltd [1941] AC

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After that, they will probably derive more puzzlement than comfort from the way that Birks declares himself entirely in accord with Lord Diplock’s pronouncement that ‘there is no general doctrine of unjust enrichment recognised in English law’.32 He says he has produced only a ‘general scheme for better ordering the specific instances’, yet he has already conceded that the cases are not in a state where analysis would be helpful. Without their aid, and granting that they probably say something different, he claims that his generic conception of event which triggers restitution adds nothing to the existing law and effects no change except what comes from better understanding of what is there already.33

This statement is at first sight difficult to reconcile with his earlier claims that the Introduction is part of a legal dialogue with the courts, which he hopes will be an essential and integral part of bringing rationality to the law. Of course, Birks could have passed it off as his ‘ideal’ set of laws, based on extra-legal concerns such as morality or desirable legal policy. But that is not his position either.34 To sum up, on the one hand, he disclaims any association with the kind of normative statement such as a ‘general principle of unjust enrichment’. The word ‘unjust’ in his own generic conception, on the contrary, is said to look ‘downwards’ towards the cases.35 So he remains a legal positivist, of sorts.36 But, on the other hand, he declines to accept that the generic conception is simply induced from the various categories of case which, according to his analysis, come within the ambit of a law of unjust enrichment. On the contrary,37 [i]t is important that this generic conception should not be thought to have been induced from the members [of the class] just listed. That would be an impressionistic exercise whose results would depend on the members selected by the observer. And he might not then be able to give a satisfactory account of his principle of selection. In fact this generic conception is deduced from the definition of restitution itself. Its species—that is to say its particular manifestations, 1, 26–31 and Fibrosa Spolka Akcynja v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 61–64. These were encouraging statements, though admittedly later House of Lords decisions were not so helpful. Orakpo v Manson Investments Ltd [1978] AC 95, 104, cited in Birks, n 1 above, 26. Birks, n 1 above, 27. Birks handles this dictum more comfortably in Birks, n 2 above, 106–7, because the courts have by now given significant recognition to the conception of restitution. 34 See Birks, ‘Unjust Enrichment—a Reply to Mr Hedley’, n 26 above. 35 Birks, n 1 above, 22–3. 36 See P Birks, ‘The Implied Contract Theory of Quasi Contract’ (1986) 6 Oxford Journal of Legal Studies 46, 83–5, where he appears to support an Austinian view. His general approach to the word ‘unjust’ is criticized as positivistic by H Dagan, The Law and Ethics of Restitution (Cambridge, Cambridge University Press, 2004) 18–25, where it is said to be weakly normative. 37 Birks, n 1 above, 17. 32 33

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as in the list just given—are only recognized and admitted subsequently, and on an objectively fixed basis.

The ensuing paragraphs are supposed to ‘explain how this happens’, but they are not in that respect easy to follow. What, then, is the register of discourse in which the ‘generic conception’ is sited? It certainly does not seem to be conventional legal discourse. It is not a statement which purports to criticise the law from an external standpoint; but neither is it a statement which carries with it the authority of law, or contributes to the better understanding of what the law is by explicating the meaning of some authoritative source. It foregoes both of these intentions. This was the point at which, in earlier years, I became diffident and uneasy. I can now see that, if we are to follow Birks, the answer lies in grasping the nettle. The generic conception of unjust enrichment is indeed inscribed in a register of discourse which is within the law, not outside it. It is part of the law because it provides system—something which is essential to effective law, and which the law of restitution lacked in 1985. The law’s system runs so deep, however, that the ordinary discourses of authority and meaning may not be capable of speaking into its register. It is discerned primarily by the text-writer, who in all other respects has no authority except as one who locates and expounds authoritative legal texts by other (primary) lawmakers. But in this one instance the text-writer is the primary source of law. In the country of the blind, the one-eyed man is king. Some may argue that this register of discourse is exceptional, its existence being limited to cases like the law of unjust enrichment in 1985. At that time, the courts had not managed to develop any systematic theory of the subject, nor any alternative system that could take its place. Where, by contrast, there is already an established system, the normal judicially focused discourse will be sufficient. But any difference, in Birks’s view at least, seems to be qualitative rather than essential. Text-writers tend to have a more critical than descriptive or creative function, but they remain the guardians of systematics as the law evolves.38 So the register of the legal possible—its basic approach and system—remains as an enduring part of our law, even if those authorised to inscribe their views in this register will sometimes change. Finally in this section, I will offer a word about the apparent independence of the discourse of the possible (systematics) from the discourse of the actual (case authority). Assuming both are legally valid, to what extent do they impinge on one another? There are obvious links between the two, but it is clear that an idea can develop in the discourse of the possible which has no effect whatsoever on the discourse of the 38

Ibid, 1–2.

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actual—the situation Lord Diplock was referring to used to be an example.39 Does the converse also apply, so that judicial statements about the reach of one of these fundamental ideas are not to be accorded the same degree of authority as they would if they were statements about legal doctrine? There have been several such statements recently, for example on the contents of the law of unjust enrichment and the law of property, including comments relating to the different qualities which manifestations of each of these laws are supposed to display.40 I do not mean to suggest that such statements are not important and helpful, and they may certainly signify gaps between judicial and textbook views; but whether they attract the normal authority which attaches to the hierarchy of the courts is more doubtful.41 Experience may show that later judges, while according such statements respect, are free to circumvent them where they prove unhelpful. The recognition of a distinct register of discourse, where the broader systematics are conceived and fine-tuned, may add some force to the idea that conventional views on judicial authority do not hold in such conversations.

IV

T H E CO N T E N T O F T H E D I S C O U RSE O F T H E ‘ P O S S I B L E ’

Assuming there is a separate register of legal discourse which can be described as ‘systematics’, or the ‘possible’, what sort of things might it contain? It is clear from the Introduction that Birks did not regard systematics as some sort of Kelsenian cipher, devoid of practical content. On the contrary, if the illustrations he gives are anything to go by, it is a repository of a great deal of useful information about good lawmaking. It is a place to which Lon Fuller’s hapless King Rex42 could have repaired to great personal profit. How, then, does Birks’s own more recent taxonomical approach stack up against the standards he himself has set? 39 Birks was never slow to assert that considerations of system and symmetry should impact on the decisions of the courts: P Birks, ‘Misdirected Funds’ (1989) 105 LQR 352; P Birks, ‘Misdirected Funds: Restitution for the Recipient’ [1989] Lloyd’s Maritime and Commercial Law Quarterly 296, 305–10 (personal liability for innocently receiving another person’s money from a third party); P Birks, ‘Restitution After Ineffective Contracts: Issues for the 1990’s’ (1990) 2 Journal of Contract Law 227, 229–30 (same rules for work done, as for money paid, under an ineffective contract). 40 Foskett v McKeown [2001] AC 102, 127 (HL); Roxborough v Rothmans of Pall Mall Australia Ltd [2001] 208 CLR 516, 543–5 (HCA); Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 559–60 (HL). One might possibly add to this list Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 716 (HL). 41 One could cite many more cases where judges are evidently uncomfortable about offering apparently authoritative statements at this level of abstraction, the most recent and significant for present purposes being Deutsche Morgan Grenfell Group plc v IRC [2006] 3 WLR 781, [22] (per Lord Hoffman), [155]–[158] (per Lord Walker) (HL). 42 L Fuller, The Morality of Law (New Haven, CT, Yale University Press, 1969).

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First, the discourse of system responds to the imperative of commonsense and simplicity, and is hostile to technical niceties and over-refined processes of reason.43 So perhaps we should be a little suspicious if, at its outer edges, the discourse leads to complex and technical differentiations and distinctions which have little bearing on the end result. Recent developments suggest that this attraction of Birks’s taxonomical system is weakening.44 Secondly, the discourse assumes that each litigant will enter the system by proffering, as fact, a series of events which establish a valid ground to obtain relief against the opposing party.45 In Birks’s language, these will ‘trigger’ a legal cause of action, in much the same way I suppose as striking the right number in a pokey machine results in a flood of cash being deposited on the player’s lap. Or, in the case of property law, the critical entering feature may be some particular form of property arrangement, which falls within a recognised legal category with its own distinctive consequences.46 But there now seems to be considerable confusion over whether the constituting facts of causes of action in unjust enrichment (for example, ‘I paid you money by mistake’) have not become entwined with legal prerequisites (‘It was my money I paid you with’).47 Thirdly, it seeks to define these events in a broad, generic way (the ‘generic conception’) so that what is most important, what goes to the ‘substance’ of the claim, comes to light first.48 So we should be suspicious of conceptualisations which can be recognised only after much refinement, particularly if they presuppose the knowledge of legal rules drawn from elsewhere in the legal system. The latest developments in Birks’s taxonomy appear to have moved away from that ideal.49 Fourthly, the whole point of a discourse of system is to outline the full picture. The generic conception must be ample enough to allow the rapid Birks, n 1 above, 3, 4, 7 (fictions). See Birks, n 2 above, 127, where Birks is concerned that his new concept, ‘absence of basis’, may have less appeal to lay people, than did his earlier idea of the ‘unjust factors’. 45 Birks, n 1 above, 9–16. 46 Ibid, 52. The current state of theory on the distinction between property and obligations is far from satisfactory, but the topic is much too large to venture into here. 47 I tentatively explored this issue in R Sutton, ‘We Just Mislaid It: The Great Project and the Problem of Order in Private Law’ (2002) 11 Otago Law Review 97. 48 Birks, n 1 above, 6–8. 49 The ‘absence of basis’ approach may perhaps be open to criticism on this ground, since all critical issues of liability are referred back to the law applicable to the parties at the time the original transaction was made. It is revealing that Birks concedes, in Birks, n 2 above, 39, that much of the fine tuning still to be done to the law of unjust enrichment will relate to the defences, rather than the rules of substantive liability. Also, the position of the rules avoiding contracts (for misrepresentation and the like) were once very securely part of the law of unjust enrichment: Birks, ‘Unjust Enrichment—a Reply to Mr Hedley’, n 3 above, 65–6. They have not yet been referred back to the law of contract: see Birks, n 2 above, 173–4, 176–7. However, their position in the law of unjust enrichment does not seem nearly so secure now that the ‘unjust factors’ approach has been virtually abandoned. 43 44

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survey of all causes of action potentially falling within it.50 At a higher level of abstraction, it looks for an array of similar generic concepts or ‘categories of larger unity’51 within the same basic system, so that any new case can be immediately assigned to its appropriate place. So, for example, the array ‘contract’, ‘unjust enrichment’, ‘wrongs’ and ‘other’ are central to the general index ‘obligations’. And further away still, participants in the discourse look for other indices, with their own arrays. For example, there is an ‘obligation’ index and a ‘property’ index, each one being divided up in its own way. Looking at the trends of debate in the subject (and without descending to any detail), it would be to put things conservatively to say that the arrangement and definition of the various generic categories has been much contested and no satisfactory overall scheme has yet been agreed upon. These are important issues for systematisation, and perhaps signs that the taxonomical system Birks nurtured so carefully over the last 20 years or so, valuable as it has proved to be, is becoming strained. It may eventually lose its place as the dominant site of debate for the law of unjust enrichment. It would yield its hegemony, I suppose, to a softer, less demanding approach to the systematics of the subject. By this I mean that the connections between the broad generalisations of ‘unjust enrichment’ and the formulation of actual legal rules may become considerably looser. If so, we will need Birks’s description of the legal discourse of systematics all the more, so we can explain what is about to happen in a coherent way.

V

A M AP O F T HE D I SCO URSE O F T HE L AW O F O B L I G AT I O N S

Following on from what I have just said, let me suppose that, at some not-too-distant future time, the worries I have referred to cannot be resolved but, indeed, become more pressing. We might then be obliged to redraw our map of the law of private obligations. What would it look like? The map would, I think, emphasise the several modes of discourse and the pathways between them, rather than classification and taxonomy of particular groups of legal rules. It would not compete with Birks’s map (any more than a map of New Zealand holiday resorts competes with a map of New Zealand Health Districts), but it would show a different dimension of enquiry. This would be a map of dynamics, showing the iterative process which gradually leads the so-called ‘laws’ of contract, unjust enrichment and 50 51

Birks, n 1 above, 10–11, ch II. Ibid, 28. The need for ‘boundaries’, however, is contestable; see below.

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wrongs into a mature and stable system.52 It requires no great feat of imagination to map well-known features of the law of obligations onto the triangular diagram portrayed in Figure 2. In doing this, I have taken the liberty of borrowing from an earlier journal article, where I came to the same result from a slightly different perspective.53 The ‘map’ I used there has been modified to meet my present purpose. For the present, the actual placement of each individual item is not a matter of critical importance. Figure 3 is a ‘mock-up’ of a much more complete picture. Many specific items have been omitted, but it is sufficient to indicate the general layout.

Fig. 3

Line A corresponds with Birks’s categories of larger content in the law of obligations, namely ‘contract’,54 ‘unjust enrichment’ and ‘wrongs’. Immediately underneath the line are some of the established subheadings of unjust enrichment, including some (for example, fraud) which might also be connected with the category ‘wrong’, and some (for example, almost contract) which might be connected with the category ‘contract’. They are confined to a selection of restitutionary subheadings; much more would be there if I had included contract and wrongs subheadings.

52 See H Dagan, ‘Legal Realism and the Taxonomy of Private Law’ [2006] Tel Aviv University Law Faculty Papers, No 38. 53 Sutton, n 47 above. 54 Birks would have used the term ‘Consent’, which is wider. I prefer ‘Contract’ because it is sharper and more focused, as a beacon (rather than a category) should be.

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Immediately above line B are selected main categories of remedial55 rights which might be claimed. I have put specific remedies at one end, since usually they will be contractual; but equally they might be placed at the other end (for example, injunctions against committing wrongs). So too with ‘damages’, which could be placed at either end depending on whether the award reflects a contract (expectation) measure or the wrongs (loss) measure. There is a considerable difference between this map and the map of unjust enrichment offered in the Introduction.56

A

The Arrows Map Movement and Choice

All the arrows in this particular map point downwards, reflecting the way that the law of system influences decisions and legal rulings. Enough has been said about that already. But there could equally well be arrows pointing upward. These would reflect the way in which new meanings and interpretations may ultimately find their way into the discourse of system. The process is represented by line C. (I have not put anything on that line, but one could imagine arguments made by lawyers in court about the way particular rules of law are to be defined, and law review commentaries and articles, occupying this territory.) Often these contributions will stay at the level of detail. They will do little to change the basic agreed array of legal categories on line A. But occasionally, especially if the law is still in an unsettled state, some changes will occur to change, or at least consolidate, the categories. For example, the decision of Lipkin Gorman,57 recognising a general head of unjust enrichment, and the academic and judicial commentary which followed it have impacted on the content of line A. New decisions or academic interpretations will more frequently affect the subheadings. For example, as a result of a series of House of Lords decisions on the so-called ‘swaps’ contracts (involving contracts purportedly made by local councils beyond their legal powers) Birks argued for a change.58 The traditional subcategories of unjust enrichment, such as money paid under mistake, he said, had disappeared, to be replaced by a 55 Following the terminology advocated in P Birks, Restitution—The Future (Sydney, Federation Press, 1992) ch 1. 56 Birks, n 1 above, 106–7. 57 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL). See P Birks, ‘The English Recognition of Unjust Enrichment’ (1991) Lloyd’s Maritime and Commercial Law Quarterly 472, 506–97. He was less supportive later on: see P Birks, The Foundations of Unjust Enrichment: Six Centennial Lectures (Wellington, Victoria University of Wellington Press, 2002) Lecture 2; Birks, n 2 above, 3–4 (‘the very success of the law of restitution is now itself impeding the recognition of the law of unjust enrichment’). 58 Birks, n 2 above, ch 6.

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more comprehensive concept of ‘absence of basis’. It is not yet clear whether this view will obtain general acceptance, but if and when it does, it will have effected a change at the subheading level. In the meantime I have temporised by putting ‘absence of legal basis’ on line B along with remedial rights, rather than amongst the subheadings.

B The Map Facilitates and Enables This is a map of discourse, not a taxonomy of categories or a list of ‘must do’s’. It tells you that, if you want to move from a particular point on line A (you decide, for example, that you have a case of unjust enrichment) to some particular result on line B (you want to have a contract set aside), there are a number of possible paths that are open to you to follow. Following one of those paths, the conversation that you have with your opponent and, if needs be, the court will result in you talking, let us say, about coercion at one point and the bars to setting aside a voidable contract at another. So, at some, probably imperceptible, point you will move from your principal category to your subheading; and at some later point, from your subheading to the form of remedial right you think you ought to have. The map is also neutral on the subject of how distinct areas of law are recognised. Birks’s classification model moves naturally from the general (the ‘law of unjust enrichment’) downwards to the particular (the ‘response of restitution’). Yet it seems that Commonwealth courts have found it intuitively easier to recognise a case of restitution by looking for a restitutionary remedial right. They have not done too badly, it seems. By 2003, Birks can assure us that ‘good maps of the response-based category of restitution have been made’. This intuition has been supported academically, as regards the law of wrongs.59 Admittedly the process is more messy, but, after all, the law of wrongs, Birks tells us in the Introduction, has no ‘generic concept’ at all. Creating one is impossible because the different causative events are ‘too diverse’.60 (A similar situation, according to Birks, is found in the Australian counterpart to the law of unjust enrichment, where some courts are thought to prefer a broad notion of ‘unconscionable conduct’, a practice he laments.61) The map allows for a ‘bottom-up’ method of recognition if that is found appropriate. 59 See J Stapleton, ‘A New Seascape for Obligations: Reclassification on the Basis of Measure of Damages’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon, 1997) ch 8, which Birks criticised in the same work, P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’, ibid, 27–33. 60 Birks, n 1 above, 17. 61 Birks, n 2 above, 18–19, 275–6.

144 C

Richard Sutton Both Particular Paths and General Tendencies are Mapped

The short arrows reflect particular journeys taken in individual cases. You do not need to follow a closely defined path every step of the way. As long as you know the general direction you are aiming for, you will most likely get there. And approximations are often good enough, to let you know how far you still have to go. A sign saying ‘Rockhampton 5 kilometeres’ is more use to you than a surveyor’s map of the Rockhampton city boundaries. And (while we are on the subject of boundaries) all you need to make progress is a sense of direction; you do not need a fence line to prevent you from taking detours. Transposing this to the journey of legal discourse, it may be more helpful (and certainly less wearing) to look back on the idea of ‘unjust enrichment’ as a beacon, rather than the marker of a segment whose boundaries are increasingly difficult to identify, the further one gets from the original source. The long arrows, on the other hand, are more encompassing. They reflect the concerns of the discourse of the possible, which, as we have seen, is highly sensitive to the whole picture. On line A, it needs to see unjust enrichment as part of an array of categories at a similar level. On lines B and C, it is concerned, not with a single case, but with the general drift of the case law and the commentaries informed writers have offered on it. So the arrows represent the cumulative affect, or general summation, of the various parts of the system. They do not set the boundaries of every possible pathway for a legal conversation. To summarise, this is a map of arrows, signs and beacons, which ‘point’ rather than ‘define’. An important advantage of such an approach is that it more readily accommodates situations where two things are going on at once. These caused Birks much difficulty. One example is where a person takes a bribe: he commits a wrong against his employer at the same time as he is unjustly enriched by money that might otherwise have been paid to the employer.62 Another is where a contracting party seeks to set an unfavourable contract aside, so as to prevent the other party to the contract from being unjustly enriched.63 One has to ask, what value is added to our systematics by saying that such cases must fall under one head or another, but not both? Of course, this being a legal journey, we do have to deal with specific rules and legal standards, just as, if we are going for a country walk, we must use stiles, or otherwise manoeuvre ourselves over fences. But these are specific to the particular ground we are on (invariably, the discourse of the actual). As stiles come in different shapes and designs, depending on the obstruction we must cross, so too concepts will differ according to 62 See Birks, n 1 above, 40–4; P Birks, ‘Misnomer’, in W Cornish et al (eds), Restitution Past, Present and Future; Essays in Honour of Gareth Jones (Oxford, Hart Publishing, 1998) 6–15. 63 See Birks, n 2 above, 125–7; and see above, n 49.

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what we are trying to achieve.64 If, for example, we want to have a contract set aside for duress, we may expect that the proof of ‘coercion’ we must offer65 will be considerably more demanding than if our purpose is simply to recover money which has been unlawfully demanded.66

VI

A L OOK INTO THE F UTURE

This essay is at the same time a tribute and a cautionary tale. It is cautionary because it shows how we can be too close to a great man to recognise the full reach of his thinking. The Introduction offered two theses, one about the dynamics of law and the other about taxonomy and classification. The second line of thought was more immediately important, given the state of the law of restitution in 1985, so it occupied much of Birks’s energy. This line of thought is still far from exhausted. But despite Birks’s efforts, it is beginning to appear weary and a little frayed at the edges. Perhaps it has tried to reach its goal too quickly. It has been the purpose of this essay to draw out the first of these strands in Birks’s thinking. In the early chapters of the Introduction, he gave us considerably more than a preamble to his taxonomy. He gave us a theory about how, within the positivist tradition, law can still change and develop. This happens through a dynamic relationship between the process of systematisation and process of law declaration. In this essay I have tried to describe these two processes more explicitly. I have no doubt that, in doing so, I have dragged the debate, and the process of ‘mapping’, more towards the realist tradition than I think Birks himself would have been prepared to go, though every now and again one finds glimpses of the same concerns in his writings. But I believe that Birks’s subtle and theoretically acceptable account of legal dynamics is an essential foundation for the debate. By recognising its importance, we may be able to carry the law of unjust enrichment (or restitution?) into a much more stable and less disputatious future than it seems to have now. I cannot help thinking that Birks’s approach to legal dynamics may prove to be one of his most significant and enduring contributions to the law of obligations.

64 See Birks, ‘Unjust Enrichment—a Reply to Mr Hedley’, n 26 above, 75 (‘I do not think that anybody ever argues that causes of action in unjust enrichment are not, as in all other areas, repressed and encouraged by a multitude of collateral policy considerations.’). 65 Pao On v Lau Yiu Long [1980] AC 614, 635–6 (HL). 66 Maskell v Horner [1915] 3 KB 106, 120–1 (CA).

8 Legal Realism and the Taxonomy of Private Law LEGAL REALI S M AND THE TAXONOMY OF PRI VATE LAW

HANOCH D AGAN * HANOCH DAGAN

I

I NTRO DUCTION

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HE R EV IVAL OF academic interest in taxonomy is one of Peter Birks’s most significant achievements and a key element of his distinguished legacy. Birks was passionate about taxonomy: ‘Better understanding of law’, he wrote, ‘depends upon a sound taxonomy of the law.’ Without proper academic attention to taxonomy, he warned, ‘the common law will dissolve into incoherence’. Birks’s concerns about taxonomy were rooted in his endorsement of legal positivism. Legal taxonomy owes its significance, in his view, to its role in the facilitation of the learning and application of positive rules. In order to pursue these important purposes, legal rules should be properly organised because information ‘which cannot be sorted is not knowledge’.1 This essay may be an unwelcome defence of the significance of legal taxonomy. It may be unwelcome because it starts from a very different jurisprudential premise than the one shared by most of the scholars interested in taxonomy, who, like Birks, tend to be positivists.2 My jurisprudential commitments, which I present in Part II, are realist; and realism, at least in my understanding, is antithetical to legal positivism.3 The profound realist critique of legal positivism is, as will be shown, quite damaging to the positivist rationale of legal taxonomy. But legal realism, at least in the charitable reading I hope to offer here, does not look down on taxonomy. Quite the contrary: as I show in Part III, there * Dean and Professor, Tel-Aviv University Faculty of Law. Thanks to Roy Kreitner, Shai Lavi, Amnon Lehavi, Chaim Saiman, Steve Smith, and Ernie Weinrib for their helpful comments. 1 P Birks, ‘Introduction’ in P Birks (ed), English Private Law, vol 1 (Oxford, Oxford University Press, 2000) li. 2 Or formalists, which is actually not the same. See E Weinrib, ‘The Juridical Classification of Obligations’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon, 1997) 37, 37. 3 But see B Leiter, ‘Legal Realism and Legal Positivism Reconsidered’ (2001) 111 Ethics 278.

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are good (read: legal realist) reasons for considering legal taxonomy to be significant. Identifying these reasons is important not only to show that realists can and should care about taxonomy, but also because it points to some prescriptions about the taxonomic enterprise that, unsurprisingly, are quite distinct from the way taxonomy is envisioned from a positivist (or doctrinalist) perspective. I present the preliminary elaboration of these prescriptions in Part IV, in the spirit of Birks’s call for a ‘taxonomic debate among scholars’. Indeed, it was Birks who characteristically urged us to continue engaging in this question, hoping that ‘with vigorous debate, the best hypotheses available now will be modified or replaced’.4 The realist programme for legal taxonomy presented here, then, may not be unwelcome after all.

II

LEGAL REALISM

I begin by briefly restating my understanding of the legacy of American legal realism.5 Rather than an account of intellectual history, the reconstruction that follows attempts to present a useful interpretation of legal realism, seeking to read realist texts in the best possible light and drawing from them a vision of law that is currently valuable. The starting point of the realist account of law is its non-positivism. Although HLA Hart’s response to the realist claim of doctrinal indeterminacy is frequently presented as decisive, it is rather beside the point. Through his distinction between core and penumbra in any given norm,6 Hart effectively addressed the problem of rule indeterminacy. But the realist claim that pure doctrinalism is a conceptual impossibility is not based on the indeterminacy of discrete rules. For legal realists, the profound and inescapable reason for doctrinal indeterminacy is the availability of multiple, potentially applicable doctrinal sources. More precisely, the irreducible choice among rules competing to control the case, all of which can be expanded or contracted, together with the many potential ways of interpreting or elaborating any legal concept, means that legal doctrine always ‘speaks with a forked tongue’ and that the judicial task is never one of static application.7 Birks, n 1 above, li. For a fuller account, see H Dagan, ‘The Realist Conception of Law’ (2007) 57 University of Toronto Law Journal 607. 6 HLA Hart, The Concept of Law (Oxford, Clarendon, 1961) 123, 141–2, 144. 7 K Llewellyn, ‘Some Realism about Realism’ in K Llewellyn, Jurisprudence: Realism in Theory and in Practice (Chicago, IL, Chicago University Press, 1962) 42, 58, 70. See also F Cohen, ‘The Problems of Functional Jurisprudence’ in L Cohen (ed), The Legal Conscience: Selected Papers of Felix S Cohen (New Haven, CT, Yale University Press, 1960) 77, 83; 4 5

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The realist claim concerning an inevitable gap between doctrinal materials and judicial outcomes evokes two major concerns: intelligibility and legitimacy. In other words, this claim opens up two questions. First, what can explain past judicial behaviour and predict its future course? Secondly, and even more significantly, how can law constrain judgments made by unelected judges?8 How, then, can the distinction between law and politics be maintained despite the collapse of law’s autonomy in its positivist rendition? The legitimacy prong of the realist challenge is particularly formidable because, as legal realists show, it is bolstered by the insidious tendency of legal doctrinalism to obscure contestable value judgements made by judges and to entrench lawyers’ unjustifiable claim to an impenetrable professionalism.9 Legal realists answer this challenge by insisting on a view of law as a going institution distinguished by the difficult accommodation of three constitutive yet irresolvable tensions: between power and reason, between science and craft, and between tradition and progress. They reject any conception of law that purports to dissolve these tensions, thereby obscuring at least one of the legal phenomenon’s irreducible characteristics. *

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Although the realist conception of law finds room for both power and reason, it appreciates the difficulties of their cohabitation. Since Holmes’s The Path of the Law,10 realists place coerciveness at the centre of their conception of law. This preoccupation with coercion is justified not only by the obvious fact that, unlike other judgements, those prescribed by law’s carriers can recruit the state’s monopolised power to back up their enforcement. More significantly, it is also premised on the institutional and discursive means that tend to downplay at least some of the dimensions of law’s power. These built-in features of law—notably, the institutional division of labour between ‘interpretation specialists’ and the actual executors of their judgments, together with our tendency, as lawyers and even as citizens, to ‘thingify’ legal constructs and accord them an aura of L Llewellyn, The Case Law System in America, P Gewirtz ed, M Alsandi trans (Chicago, IL, Chicago University Press, 1989) 25, 45, 51; K Llewellyn, The Common Law Tradition: Deciding Appeals (Boston, MA, Little Brown, 1960) 77–91; K Llewellyn, ‘Remarks on the Theory of Appellate Decision and the Rules or Canons About How Statutes Are to Be Construed’ (1950) 3 Vanderbilt Law Review 395; F Rodell, Woe Unto you, Lawyers! (New York, Pageant Press, 1939) 154, 160. See also J Frank, Law and the Modern Mind (New York, Brentos, 1930) 138. 8 A Kronman, ‘Jurisprudential Responses to Legal Realism’ (1988) 73 Cornell Law Review 335, 335–6. 9 Rodell, n 7 above, 3–4, 6–7, 153, 157–8, 186, 189, 196, 198. 10 O Holmes, ‘The Path of the Law’ in O Holmes, Collected Legal Papers (New York, Harcourt, Brace and Howe, 1920) 167.

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obviousness and acceptability—render the danger of obscuring law’s coerciveness particularly troubling.11 They explain the realists’ wariness of the trap entailed in the blurring of law’s coerciveness. This risk is particularly high with respect to private law, which structures our daily interactions and tends to blend into our natural environment.12 Not surprisingly, then, legal realists focus their attention on exposing the contingency of the concepts and rules of property, contract and tort law in an attempt to expose the ways in which the law applies its power.13 But realists also reject as equally reductive the mirror image of law, which portrays it as sheer power (or interest, or politics). They insist that law is also a forum of reason, and that reason poses real—albeit elusive—constraints on the choices of legal decision-makers, and thus on the concomitant exercise of state power. Law is never only about interest or power politics; it is also an exercise in reason-giving. Furthermore, because so much is at stake in reasoning about law, legal reasoning becomes particularly urgent and rich, attentive, careful and serious. Legal actors understand that reasons can justify law’s coercion only if they are properly grounded in human values. Realists are thus impatient with attempts to equate normative reasoning with parochial interests or arbitrary power. They also find such exercises morally irresponsible because they undermine both the possibility of criticising state power and the option of marshalling the law for morally required social change.14 Yet realists are also wary of the idea that reason can displace interest, or that law can exclude all force except that of the better argument. Realists claim that, because reasoning about law is reasoning about power and interest, the reasons given by law’s carriers should always be treated with suspicion. This caution accounts for the realists’ preference for value pluralism, as well as for their understanding of law’s quest for justification 11 F Cohen, ‘Transcendental Nonsense and the Functional Approach’ (1935) 35 Columbia Law Review 809, 811–12, 820–1, 827–9; J Dewey, ‘Logical Method and Law’ in WW Fisher III, MJ Horowitz and TA Read (eds), American Legal Realism (New York, Oxford University Press, 1993) 185, 191, 193; O Holmes, ‘Law in Science and Science in Law’ in Holmes, Collected Legal Papers, n 10 above, 210, 230, 232, 238–9. See also R Cover, ‘Violence and the Word’ in M Minow et al (eds), Narrative, Violence, and the Law: the essays of Robert Cover (Ann Arbor: University of Michigan Press, 1992) 203. 12 R Gordon, ‘Unfreezing Legal Reality: Critical Approaches to Law’ (1987) 15 Florida State University Law Review 195, 212–14. 13 Cohen, n 11 above, 814–818, 840; L Jaffe, ‘Law Making by Private Groups’ (1937) 51 Harvard Law Review 212. 14 K Llewellyn, ‘The Normative, the Legal, and the Law-jobs: The Problem of Juristic Method’ (1940) 49 Yale Law Journal 1355, 1362–5, 1367–8, 1370, 1381–3, 1387. See also T Bechtler, ‘American Legal Realism Revaluated in Law’ in T Bechtler (ed), Social Context: Liber Amicorum Honouring Professor Lon L Fuller (Deventer, Kluwer, 1978) 3, 20–1; H Jones, ‘Law and Morality in the Perspective of Legal Realism’ (1961) 61 Columbia Law Review 799, 801, 809; H Yntema, ‘The Rational Basis of Legal Science’ (1931) 31 Columbia Law Review 295, 255.

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as a perennial process that constantly invites criticism of law’s means, ends and other (particularly distributive) consequences.15 Legal realists do not pretend they have solved the mystery of reason, or that they have demonstrated how reason can survive in law’s coercive environment. Their recognition that coerciveness and reason are doomed to coexist in any credible account of the law is nonetheless significant. Making this tension an inherent characteristic of law means that reductionist theories employing an overly romantic or too cynical conception of law must be rejected. This approach also steers us towards a continuous critical awareness of the complex interaction between reason and power. It thereby seeks to accentuate the distinct responsibility incumbent on the reasoning of and about law, minimising the corrupting potential of the self-interested pursuit of power and the perpetuation of what could end up as merely group preferences and interests. *

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I turn now to the type of reasons realists invite into the legal discourse and thus introduce law’s second constitutive tension. The forward-looking aspect of legal reasoning in its realist rendition relies on both science and craft. Realists recognise the profound differences between lawyers as social engineers who dispassionately combine empirical knowledge with normative insights on the one hand, and lawyers as practical reasoners who employ contextual judgement as part of a process of dialogic adjudication on the other. They nonetheless insist on preserving the difficulty of accommodating science and craft as yet another tension constitutive of law. Realists identify three families of fact-finding pursuits that are of some importance to law: investigating the hidden regularities of legal doctrine in order to restore law’s intelligibility and predictability; studying the practical consequences of law in order better to direct the evolution of law and further its legitimacy; and responding to the prevailing social mores—the conventional morality—in order to further stabilise the objectivity and legitimacy of law.16 My prototype realists, however, reject any pretence that knowledge of these important social facts can be a substitute for political morality. They realise that value judgements are indispensable not only when evaluating empirical research, but also when simply choosing the facts to be investigated. Moreover, they are always 15 Holmes, n 10 above, 181; K Llewellyn, ‘On the Good, the True, the Beautiful in Law’ in Llewellyn, Jurisprudence, n 7 above, 167, 211–12; H Yntema, ‘Jurisprudence on Parade’ (1941) 39 Michigan Law Review 1154, 1169. 16 See respectively, eg J Bingham, ‘What is the Law?’ (1912) 11 Michigan Law Review 1, 17; J Schlegel, American Legal Realism and Empirical Legal Science (Chapel Hill, NC, University of North Carolina Press, 1995) chs 2 and 4; B Cardozo, The Nature of the Judicial Process (New Haven, CT, Yale University Press, 1921) 105–6, 108.

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careful not to accept existing normative preferences uncritically. Regarding all three empirical avenues, legal realists insist that neither science nor an ethics that ignores the data of science offers a valid test of law’s merits. Legal analysis needs both empirical data and normative judgments.17 Because law affects people’s lives dramatically, these social facts and human values must always inform the direction of legal evolution. Legal reasoning necessarily shares this feature with other forms of practical reasoning, but the realist conception of law also emphasises that legal reasoning is, to some extent, a distinct mode of argumentation and analysis. Hence, realists pay attention to the distinctive institutional characteristics of law and study their potential virtues, while still aware of their possible abuse. The procedural characteristics of the adversarial process as well as the professional norms that bind judicial opinions, notably the requirement of a universalisable justification, provide a unique social setting for adjudication. These procedural characteristics establish the accountability of law’s carriers to law’s subjects and encourage judges to develop what Felix Cohen terms ‘a many-perspectived view of the world’ that ‘can relieve us of the endless anarchy of one-eyed vision’, a ‘synoptic vision’ that is ‘a distinguishing mark of liberal civilization’.18 Moreover, because the judicial drama is always situated in a specific human context, lawyers have constant and unmediated access to human situations and to actual problems of contemporary life. This contextuality of legal judgments ensures lawyers a unique skill in capturing the subtleties of various types of cases and in adjusting the legal treatment to the distinct characteristics of each category.19 *

*

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The extended realist treatment of science and craft derives from the conviction that law is profoundly dynamic; hence my third constitutive tension. Law’s inherent dynamism implies that the legal positivist attempt to understand law statically by sheer reference to verifiable facts, such as the authoritative commands of a political superior or the rules identified by 17 F Cohen, ‘Modern Ethics and the Law’ (1934) 4 Brooklyn Law Review 33, 45; Cohen, n 11 above, 75–6; W Twining,’ The Idea of Juristic Method: A Tribute to Karl Llewellyn’ (1993) 48 University of Miami Law Review 119, 151–2. 18 F Cohen, ‘Field Theory and Judicial Logic’ in L Cohen, The Legal Conscience, n 7 above, 121, 125–6. See also Llewellyn, The Common Law Tradition, n 7 above, 46–7, 132; K Llewellyn, ‘American Common Law Tradition and American Democracy’ in Llewellyn, Jurisprudence, n 7 above, 282, 308–10. 19 H Oliphant, ‘A Return to Stare Decisis’ (1928) 14 American Bar Association Journal 71, 73–74, 159. See also K Llewellyn, ‘A Realistic Jurisprudence: The Next Step’ in Llewellyn, Jurisprudence, n 7 above, 3, 27–8, 32; W Cook, ‘Scientific Method and the Law’ in Fisher et al, above n 11, 242, 246.

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a rule of recognition,20 is hopeless. In the realist conception, law is ‘a going institution’; it is, in John Dewey’s words, ‘a social process, not something that can be done or [can] happen at a certain date’. As a going institution, law is structured to be an ‘endless process of testing and retesting’; thus understood, law is a great human laboratory continuously seeking improvement.21 This quest ‘for justice and adjustment’ in the legal discourse is invariably constrained by legal tradition. Law’s past serves as the starting point for contemporary analysis, and not only because it is an anchor of intelligibility and predictability. Legal realists always begin with the existing doctrinal landscape because it may (and often does) incorporate valuable, though implicit and sometimes imperfectly executed, normative choices. In other words, since the adjudicatory process so uniquely combines scientific and normative insights within a legal professionalism premised on institutional constraints and practical wisdom, its past yield of accumulated judicial experience and judgement deserves respect. Although legal realists do not accord every existing rule overwhelming normative authority, they do obey Karl Llewellyn’s ‘law of fitness and flavor’, whereby the instant outcome and rule always think ‘with the feel’ of the case law system as a whole, and ‘go with the grain rather than across or against it’.22 Indeed, realists celebrate common law’s Grand Style, described by Llewellyn as ‘a functioning harmonisation of vision with tradition, of continuity with growth, of machinery with purpose, of measure with need’, mediating between ‘the seeming commands of the authorities and the felt demands of justice’.23 They thus insist that law, or any specific segment of legal doctrine, can be properly understood only if we regain the realist appreciation of law’s most distinctive feature: the uneasy but inevitable accommodation of power and reason, science and craft, and tradition and progress.

20 See respectively J Austin, The Province of Jurisprudence Determined, HLA Hart ed (London, Weidenfeld & Nicolson, 1954) 14; Hart, n 6 above, 107. See also J Raz, The Authority of Law (Oxford, Oxford University Press, 1979) 40. 21 J Dewey, ‘My Philosophy of Law’ in Julius Rosenthal Foundation (ed), My Philosophy of Law: Credos of Sixteen American Scholars (Boston, MA, Boston Law Book Co, 1941) 73, 77. See also K Llewellyn, ‘My Philosophy of Law’, ibid, 183, 183–4; M Radin, ‘My Philosophy of Law’, ibid, 285, 295. 22 K Llewellyn, The Common Law Tradition, n 7 above, 36, 38, 190–1, 217, 222–3; Llewellyn, The Case Law System in America, n 7 above, 77; K Llewellyn, ‘Law and the Social Sciences’ in Llewellyn, Jurisprudence, n 7 above, 357, 361–2; Llewellyn, n 14 above, 1385. 23 Llewellyn, The Common Law Tradition, n 7 above, 37–8. See also Cardozo, n 16 above, 179; R Dworkin, Law’s Empire (London, Fontana, 1986) 400–13.

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T H E F U N C T I O N S O F TAX O N O M Y

Contemporary friends of legal taxonomy emphasise the usefulness, indeed the inevitability, of classification for the purpose of gaining knowledge of law. With Birks, they insist that: There is no body of knowable data which can subsist as a jumble of mismatched categories. The search for order is indistinguishable from the search for knowledge.24

Thus, for example, Stephen Smith, a proud defender of the legal taxonomy project in its doctrinalist rendition, argues that: To make good decisions courts need to distinguish like from unlike; to understand the law scholars need to do the same thing. When lawyers and scholars argue about how a case should be decided, or about the meaning of a particular rule, they are in large part arguing about how to classify the case or the rule.25

Insofar as these claims stand for the proposition that reasoning in general, and thus legal reasoning more particularly, must rely on certain concepts that necessarily involve some classificatory work, they are indeed undisputable truisms.26 But both Birks and Smith go further than this. Birks engaged in, and Smith vehemently defended, a specific and indeed particularly doctrinalist method of classification, resorting to the sort of categories that judges use when deciding cases, that legislators employ when making law, and that lawyers use when arguing before courts. In other words, these are categories such as ‘tort’, ‘contract’, ‘unjust enrichment’, ‘equity, and so on.27

Recourse to existing doctrinal categories fits well with the perception of taxonomy as a means for gaining knowledge. If, indeed, as doctrinalists like to claim, the taxonomy of the law is analogous to cartography, if legal classification is on a par with mapping,28 it makes perfect sense to take the existing legal terrain as the fixed data that need to be organised. Legal realism upsets this seemingly straightforward programme. For legal realists, as noted, law is a doctrinal system in movement: as the shape of legal doctrine ‘is made and remade as its narrative continues to unfold . . . even apparently surprising lurches can be integrated seamlessly’.29 Birks, n 1 above, xxxi–xxxii. S Smith, ‘Taking Law Seriously’ (2000) 50 University of Toronto Law Journal 241, 244. J Feinman, ‘The Jurisprudence of Classification’ (1989) 41 Stanford Law Review 661, 710; P Jaffey, ‘Classification and Unjust Enrichment’ (2004) 67 MLR 1012, 1013; Weinrib, n 2 above, 54. 27 Smith, n 25 above, 246. 28 Birks, n 1 above, xxxv. 29 D Herzog, Poisoning the Minds of the Lower Orders (Princeton, NJ, Princeton University Press, 1998) 15–16, 18. See also M Krygier, ‘Law as Tradition’ (1986) 5 Law & Philosophy 237, 242, 248. 24 25 26

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Therefore, law cannot be understood merely by reference to its static elements (its existing rules); understanding the doctrinal materials at any given moment as the things to be classified misses the inherent dynamism of the law. This means that the analogy of legal taxonomy to cartography is mistaken and even misleading. Cartography assumes stability in the geographical features to be mapped; it implies that there is ‘a fixed and immutable topography “out there” waiting to be accurately charted’. But law is constantly changing. Therefore, ‘no map is ever likely to be produced that can, at one and the same time, explain the past and act as a means for predicting the future’.30 The doctrinalist version of legal taxonomy is not only misguided because it fails to account for the dynamism of law, it is also perilous, because it contributes unduly to one of the most important risks of legalese identified by realists: the ‘thingification’ of legal concepts.31 To be sure, using legal concepts is unavoidable. As Cohen argued, however, this innocuous practice is risky because of the lawyerly tendency to essentialise contingent legal categories as if they somehow transcend human choice and represent a non-modifiable part of our natural or ethical environment.32 This risk is serious because, as I have hinted above, such ‘thingification’ is one of the main sources of the unwarranted immunity of too many parts of the law from proper justification. This risk is particularly high with respect to private law, which structures our daily interactions and tends to blend into our natural environment.33 Not surprisingly, then, legal realists focused on exposing the contingency of the concepts and rules of property, contract and tort law in an attempt to expose the hidden ways in which law applies its power.34 Geoffrey Samuel 30 S Waddams, Dimensions of Private Law: Categories and Concepts in Anglo-American Legal Reasoning (Cambridge, Cambridge University Press, 2003) 12–13, 226; R Pound, ‘Classification of Law’ (1924) 37 Harvard Law Review 933, 942–3; G Samuel, ‘Can the Common Law be Mapped?’ (2005) 55 University of Toronto Law Journal 271, 286, 290, 295. 31 See n 11 above and the accompanying text. 32 See Cohen, n 11 above, 11–12. See also J Bingham, ‘What is the Law?’ (1912) 11 Michigan Law Review 1, 12; J Waldron, ‘Transcendental Nonsense and System in the Law’ (2000) 100 Columbia Law Review 16, 51 (2000). 33 Gordon, n 12 above, 195, 212–14. 34 Cohen’s critique about the ‘thingification’ of property is a prime example. Courts justify the protection of trade names on the grounds that, if people create a thing of value, they are entitled to protection against deprivation because a thing of value is property. ‘The vicious circle inherent in this reasoning’, explains Cohen ‘is plain. It purports to base legal protection upon economic value, when, as a matter of actual fact, the economic value of a device depends upon the extent to which it will be legally protected.’ This flawed legal reasoning obscures the coercive and distributive effects of law. What courts actually do in these cases is to establish ‘inequality in the commercial exploitation of language’, thus creating and distributing ‘a new source of economic wealth or power’. Traditional legal discourse shields these decisions from normative critique and is thus tantamount to ‘economic prejudice masquerading in the cloak of legal logic’. Unchecked, law may serve ‘to perpetuate class prejudices and uncritical assumptions which could not survive the sunlight of free ethical controversy’. See Cohen, n 11 above, 814–18, 840. See also Jaffe, n 13 above.

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is thus right on target when he criticises the project of doctrinalist legal taxonomy, which confusingly treats ‘[c]ontracts, torts, ownership, rights or whatever’ as ‘phenomena waiting to be observed and rationalized by independent observers’. Because, in fact, these ‘are notions created by a particular group of “scientists” who in effect impose them on social reality’, taxonomic hypotheses in law cannot be verified (or falsified) by correspondence to external facts. The taxonomic scheme we use in law does not merely organise our legal knowledge35; rather, our legal taxonomy necessarily participates in our construction of that knowledge and thus in the ongoing evolution of law.36 *

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Realists, as noted, dispute the cogency of doctrinal legal taxonomy and, furthermore, warn against its overly conservative potential implications. This position is at times mistaken for an advocacy of ad hoc judgments and thus a dismissal of the significance of legal classifications, rendering the title of the next section of this essay—realist taxonomies—an ostensible oxymoron. But legal realism (at least if charitably interpreted37) in fact rejects the dubious nominalistic approach to law and recognises the importance of legal categories and thus of legal taxonomy.38 Legal realists acknowledge that law’s use of categories, concepts and rules is unavoidable39 and even desirable, and that in most cases many legal reasoners should simply follow rules.40 (This is why realists take pains to improve rules, relying on empirical data, normative commitments and situation sense.) In other words, a ‘rule-oriented realism’ is not a

35 But see P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 University of Western Australia Law Review 1, 9. 36 G Samuel, ‘English Private Law: Old and New Thinking in the Taxonomy Debate’ (2004) 24 Oxford Journal of Legal Studies 335, 341, 362. See also M Minow, Making All the Difference: Inclusion, Exclusion, and American Law (Ithaca, NY, Cornell University Press, 1990) 3, 4, 8; Waddams, n 30 above, 2–3, 14–15, 21–2, 226–7; Feinman, n 26 above, 663; Pound, n 30 above, 937–8; J Penner, ‘Basic Obligations’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon, 1997) 91; Samuel, n 30 above, 286. Cf R Cotterrell, The Politics of Jurisprudence (London, Butterworths, 1989) 85–7, 106–9 (comparing Kelsen’s conceptualism to Hart’s empiricism). 37 As the text implies, a small minority among realists does endorse nominalism. See, eg Rodell, n 7 above, 169–74, 201–2. 38 Cf A Altman, ‘The Legacy of Legal Realism’ (1986) 10 Legal Studies Forum 167, 171–172; T Rakoff, ‘The implied Terms of Contract: Of “Default Rules” and “Situation Sense”’ in J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law (Oxford, Clarendon, 1995) 191, 216. 39 The unavoidability of using categories in thinking about law follows, of course, from the unavoidability of using categories in thinking in general. 40 Rules authoritatively settle disputes, thus securing the moral benefits of coordination, expertise and efficiency. See L Alexander and E Sherwin, The Rule of Rules (Durham, NC, Duke University Press, 2001) 12–15. See also, eg F Schauer, ‘The Generality of Law’ (2004) 107 West Virginia Law Review 217, 224–34.

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contradiction in terms41 so long as we remember that the (limited) stability of rules at any given moment relies on, and is thus contingent on, a convergence of lawyers’ background understandings and not on the determinacy of the doctrine as such.42 Furthermore, most realists do not subscribe to the problematic strategy of rule-sensitive particularism, which allows judges to depart from rules whenever the outcome of the particular case at hand so requires while taking into account both substantive values and the value of preserving the rule’s integrity.43 Rather, they merely argue that at least some legal actors, notably judges of appellate courts, should occasionally use new cases as triggers for an ongoing refinement of rules. These are opportunities to revisit the normative viability of existing rules qua rules and to re-examine the adequacy of legal categorisation. I return to this last point in the next section but, before that, I still need to explain why legal realists should think of the taxonomy of private law not merely as a necessary pursuit but also as one that is worthwhile, indeed laudable. In other words, while legal realists resist any attempt to essentialise law’s existing categories, they acknowledge their potentially desirable role. *

*

*

Legal realists do not dismiss law’s existing categories; quite the contrary. For realists, these categories are and should be the starting point of any analysis of legal questions. They assume (until proven wrong) that the current categorisation incorporates valuable, although implicit and sometimes imperfectly executed, normative choices. This conservative assumption derives not only from the pragmatic reality that existing rules cannot be abandoned completely, but also from a recognition that existing categories represent an accumulated judicial experience that is worthy of respect.44 This respect follows from the realist celebration of the common law’s commitment to continuity, discussed in Part I. It also derives, even more specifically, from the important functions realists ascribe to legal categories, which I discuss below.45

But cf E Sherwin, ‘Rule-oriented Realism’ (2005) 103 Michigan Law Review 1578. See Alexander and Sherwin, n 40 above, 32–4. Contra Sherwin, n 41 above, 1591–4. See T Grey, ‘Freestanding Legal Pragmatism’ (1996) 18 Cardozo Law Review 21, 26; T Grey, ‘The New Formalism’ 12, Stanford Public Law & Legal Theory Working Paper Series, Working Paper No 4 (1999) 12; available online at http://papers.ssrn.com/paper.taf?abstract <uscore>id=200732t. See also Dworkin, n 23 above, 252–3. I discuss the relationship between the realist conception of law and Dworkin’s conception of law as integrity in Dagan, n 5 above, s IVB. 45 For an elaborate discussion in the context of property law, see H Dagan, ‘The Craft of Property’ (2003) 92 California Law Review 1517. 41 42 43 44

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Each legal category (or subcategory) targets, in its own way and with respect to some intended realm of application, a set of human values that can be promoted by its constitutive rules. As such, legal categories consolidate people’s expectations regarding core types of human relationships so that they can anticipate developments when entering, for instance, a common interest community, or, for that matter, invading other people’s rights. Thus, a set of fairly precise rules must govern each legal category of this type so as to enable people to predict the consequences of various future contingencies and to plan and structure their lives accordingly.46 Furthermore, legal categories also serve as a means for expressing law’s normative ideals for these types of human interaction (think, for instance, of crimes (as opposed to torts), or of marriage or contract). For this reason, legal taxonomy performs a significant expressive and cultural function. Both roles—consolidating expectations and expressing law’s ideals—require some measure of stability: to form effective frameworks of social interaction and cooperation, law can recognise a necessarily limited (and relatively stable) number of categories.47 These functions of legal taxonomy explain the distinctions between private law and other parts of the law, the distinctions between the various fields within private law, and the more minute distinctions between subcategories within these fields. Exploring these differences in any detail is surely far beyond the scope of this short essay, but a brief sample will hopefully suffice for a sketchy demonstration of these points. Consider first the distinction between private law and public law.48 As many realist and post-realist authors have shown, the private–public distinction is far from airtight and, more significantly, is by no means natural or conceptually inevitable. For realists, as noted, this continuity between private law and public law means that private law should not be immune from a distributive analysis either, and that private lawyers, like their public brethren, should (also) invariably consider the distributive implications of the rules they advocate or apply.49 Good reasons still 46 As should be clear by now, a realist approach does not undermine law’s predictability; in fact, it reinforces it. At least relative to the hopeless indeterminacy of pure doctrinal analysis that, as noted, is caused first and foremost by the multiplicity of doctrinal sources, a contextual normative inquiry can secure a much more stable, and thus predictable, legal equilibrium. See, eg K Llewellyn, The Bramble Bush (New York, Oceana, 1977) 48; Llewellyn, The Common Law Traditions, n 7 above, 19–61, 178–255; M Martin, Legal Realism: American and Scandinavian (New York, Lang, 1997) 39–40, 76. 47 This prescription of standardisation is particularly acute with regard to the expressive role that mandates limiting the number of legal categories because law can effectively express only so many ideal categories of interpersonal relationships. 48 I believe that an analysis analogous to the one I offer regarding the private–public distinction applies to the distinction between private law and criminal law. Cf P Robinson and J Darley, ‘The Utility of Desert’ (1997) 91 Northwestern University Law Review 453, 479–482. 49 See, eg H Dagan, Unjust Enrichment: A Study of Private Law and Public Values (Cambridge, Cambridge University Press, 1977); H Dagan, ‘Takings and Distributive Justice’ (1999) 85 Virginia Law Review 741.

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remain, however, for retaining the separate ways in which the law constructs horizontal as opposed to vertical social interactions. Some of our most important normative commitments (to freedom-enhancing pluralism and to individuality-enhancing multiplicity) justify adhering, and indeed facilitating, some such differentiation between the private and the public in order to fracture and multiply human authority.50 Furthermore, fundamental principles of democratic governance justify imposing on public authorities particularly demanding obligations of trust, which are inappropriate with respect to most (although not necessarily all) private actors. The private–public distinction serves as a means for entrenching these expectations and the ideals for which they stand. By the same token, there are good (read: realist) reasons for the division of private law into separate fields. There are, for example, important and rather fundamental normative distinctions between contracts and torts: at least from the viewpoint of the important value of human autonomy, the purposes of contracts and torts are distinctly different.51 Contracts are usually understood as conventional frameworks of voluntary promises, which the law enforces in order to allow people to promote their own goals by using other people (or their resources) without immorally using these people.52 By contrast, from an autonomy perspective, tort law focuses mainly on prescribing rules of action and of liability that reconcile the competing claims of liberty and security in fair ways.53 Hence, whereas contract law consolidates expectations and expresses ideals regarding cooperative human interactions, tort law performs similar tasks with respect to conflicting human interactions.

50 See D Herzog, Happy Slaves: A Critique of Consent Theory (Chicago, IL, University of Chicago Press, 1989) 156, 166–8, 173–5. 51 Even the economic analysis of the law, which is of course preoccupied with another important value—social welfare—acknowledges the difference between contract law and tort law. While the former is aimed, in this view, at maximising the welfare of contractual parties, the latter is preoccupied with minimising the costs of accidents and the costs of their prevention. Compare A Schwartz and R Scott, ‘Contract Theory and the Limits of Contract Law’ (2003) 113 Yale Law Journal 541 with G Calabresi, The Costs of Accidents: A Legal and Economic Analysis (New Haven, CT, Yale University Press, 1970). 52 See C Fried, Contract as Promise: A Theory of Contractual Obligation (Cambridge, MA, Harvard University Press, 1981) 7–17; D Markovitz, ‘Contract and Collaboration’ (2004) 114 Yale Law Journal 1419. 53 See D Dobbs, Torts and Compensation: Personal Accountability and Social Responsibility for Injury (St Paul, MN, West Publishing, 2nd edn, 1993) 8–9; A Ripstein, Equality, Responsibility, and The Law (Cambridge, Cambridge University Press, 1999) 6; G Keating, ‘Rawlsian Fairness and Regime Choice in the Law of Accidents’ (2004) 72 Fordham Law Review 1857, 1862–70. There are, to be sure, other accounts of the role of autonomy in torts. Thus, for example, Ernest Weinrib insists that corrective justice is the regulative principle of torts (and more generally of private law). See E Weinrib, The Idea of Private Law (Cambridge, MA, Harvard University Press, 1995). But Weinrib also sees important distinctions, with significant remedial consequences, between contracts and torts. See E Weinrib, ‘Punishment and Disgorgement as Contract Remedies’ (2003) 78 Chicago-Kent Law Review 55.

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Finally, the internal categorisation of each specific field of private law also obeys this legal realist logic. Property law, for example, is divided into different property institutions that parse the social world into distinct types of human interaction with respect to given categories of resources. Some property institutions govern arm’s-length relationships between strangers (or market transactors), and are accordingly structured along the lines of the Blackstonian conception of property as ‘sole despotic dominion’:54 they are atomistic and competitive, and they vindicate people’s negative liberty. Other property institutions, such as marital property, deal with intimate relationships and are therefore dominated by a much more communitarian view of property, in which ownership is a locus of sharing. Finally, many other property institutions governing relationships between people who are neither strangers nor intimates, such as landlords and tenants, members of the same local community, neighbours and co-owners, lie somewhere along the spectrum between atomistic and communitarian norms. In all these cases, both autonomy and community are of the essence and ownership thus implies both rights and responsibilities.55

IV

R E A L I S T TA X O N O M I E S

Having recovered the value that realists place on legal taxonomy, my remaining task is to consider the main attributes of the taxonomic enterprise in its realist rendition. As the discussion that follows demonstrates, realist taxonomies are different from their doctrinalist counterparts in three key features. Proponents of the doctrinalist taxonomic venture believe, as noted, that legal taxonomy provides the best way to understand law’s ‘organizational claims’ and, therefore, the law itself.56 This view is deficient because, like the very project of doctrinal legal taxonomy, it assumes that taxonomy is exogenous to ‘law’s self-understanding’ and that legal classifiers merely describe, rather than affect, the legal landscape. This quietist assumption is, of course, exactly what legal realism challenges as wrong and misleading. The first and most fundamental distinctive feature of the realist taxonomy of law, therefore, is its relative dynamism. Llewellyn, for example, invites lawyers to rethink law’s received categories because, while legal classification cannot be eliminated, ‘to classify is to disturb’ and hence ‘obscure some of the data under observation and give fictitious value 54 W Blackstone, Commentaries on the Laws of England, vol 2 (London, Butterworth & Son, 1760) 2. 55 Dagan, n 45 above, 1559–60. 56 Smith, n 25 above, 249–56.

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to others’. For this reason, classifications ‘can be excused only in so far as [they are] necessary to the accomplishing of a purpose’. And because purposes may change, ‘the available tradition of categories’57 should be periodically re-examined. Rethinking legal categorisation is important for a further reason, namely, because it may help expose otherwise hidden and sometimes unjustified legal choices of inclusion and exclusion. To avoid the pitfalls of essentialising the existing legal taxonomy, realists refuse to accept the existing legal categories as a given, and call instead for an ongoing (albeit properly cautious) process of identifying the human values underlying these categories and rethinking the legal rules that best promote them. The appeal to the prevailing legal taxonomy is never the end of the legal analysis, because invoking these categories always involves, at least potentially, some tinkering with their content as well as their boundaries.58 In other words, the realist approach takes the values underlying legal categories and not only the existing doctrinal content of these categories as part and parcel of the legal analysis, and thus makes these values an object of ongoing critical and constructive inquiry.59 The realist taxonomic enterprise is thus both backward and forward looking, constantly challenging the continued validity and desirability of the normative underpinnings of existing legal categories, their responsiveness to the social context in which they are situated, and their effectiveness in promoting their contextually examined normative goals.60 At times, such an account helps to fill gaps in the law by prescribing new rules that bolster and vindicate these goals even further. At other times, it points out ‘blemishes’ in the existing categories, rules that undermine the most illuminating and defensible account of such a legal category that should be reformed so that the law may live up to its own ideals.61 This reformist potential may yield different types of legal reforms. In some cases, the reform is quite radical: the abolition of a legal category or an overall reconstruction of its content. In others, more moderate options are in order, such as restating the doctrine pertaining to a legal category in a way that brings its rules closer to its underlying commitments, in the process removing indefensible rules, or adjusting Llewellyn, n 19 above, 27. Cf Herzog, n 29 above, 18. Cf Jaffey, n 26 above (although Jaffey mistakenly believes that each ‘justificatory category’ should necessarily have one ‘common underlying principle or justification’); Weinrib, n 2 above, 37–8, 55 (although Weinrib is, of course, not a legal realist). 60 Here, we must rely on the vague notion of ‘promoting’ to capture the complex ways in which law can facilitate human values. The normative analysis recommended by legal realism seeks to capture law’s material effect on people’s behaviour, its expressive and constitutive impact, and the intricate interdependence of the two effects. See H Dagan, ‘Just Compensation, Incentives, and Social Meanings’ (2000) 99 Michigan Law Review 134. 61 See R Dworkin, Taking Rights Seriously (London, Duckworth, 1978) 118–23. 57 58 59

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one given category to the various social contexts in which it may be situated.62 The realist approach to taxonomy is thus an exercise in the kind of legal optimism so typical of the common law tradition. Rather than an attempt just to understand the existing legal terrain, it simultaneously aims to explain and develop legal categories in a way that accentuates their normative desirability while remaining attuned to their social context. *

*

*

A second important characteristic of the realist taxonomic blueprint, which is again antithetic to the doctrinalist tenor,63 is a strong preference for relatively narrow categories. Thus, Llewellyn finds wholesale legal categories (such as contracts or property) ‘too big to handle’, since they encompass too ‘many heterogeneous items’. He thus recommends ‘[t]he making of smaller categories—which may either be subgroupings inside the received categories, or may cut across them’.64 By employing these narrow categories, lawyers can develop the law while ‘testing it against life-wisdom’. Again, the claim is not that ‘the equities or sense of the particular case or the particular parties’ should be determinative; rather, it is that decision-making should benefit from ‘the sense and reason of some significantly seen type of life-situation’.65 The realist celebration of the traditional common law strategy of employing narrow legal categories, each covering only relatively few human situations, follows directly from the realist commitment to assure that law indeed serves life. As Herman Oliphant noted, this strategy ‘divide[s] and minutely subdivide[s] the transactions of life for legal treatment’, with the desirable result of a significant ‘particularity and minuteness in the [legal] classification of human transactions’. Narrow categories, Oliphant explained, help to produce ‘the discrimination necessary for intimacy of treatment’, holding lawyers and judges close to ‘the actual transactions before them’ and thus encouraging them to shape law ‘close and contemporary’ to the human problems they deal with. Only where legal taxonomy adheres to the injunction of creating narrow categories does it facilitate one of the most distinct comparative advantages of lawyers (judges) in producing legal norms—their ‘battered 62 For some examples for these different outcomes in the context of property law, see Dagan, n 45 above, 1563–4. 63 See P Birks, ‘Definition and Division: A Mediation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon, 1997) 34–5; Weinrib, n 2 above, 40. 64 Llewellyn, n 19 above, 27–8, 32; Llewellyn, ‘Some Realism about Realism’, n 7 above. See also, eg W Fisher, ‘The Development of American Legal Theory and the Judicial Interpretation of the Bill of Rights’ in M Lacey and K Haakonssen (eds), A Culture of Rights (Cambridge, Cambridge University Press, 1991) 266, 275. 65 K Llewellyn, ‘The Current Recapture of the Grand Tradition’, in Llewellyn, Jurisprudence, n 7 above, 215, 217, 219–20 (emphasis in original).

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experiences of . . . brutal facts’, namely, their daily and unmediated access to actual human situations and problems in contemporary life. When law’s categories are in tune with those of life so that an ‘alert sense of actuality checks our reveries in theory’, lawyers uniquely enjoy ‘the illumination which only immediacy affords and the judiciousness which reality alone can induce’.66 Indeed, our lives are divided into economically and socially differentiated segments,67 and each such ‘transaction of life’ has some features that are of sufficient normative importance, that is, that gain significance from the perspective of some general principle or policy that justifies a distinct legal treatment.68 If law is to serve life, it should tailor its categories narrowly and in accordance with these patterns of human conduct and interaction so that it can gradually capture and respond to the characteristics of each type of cases.69 Only in this way can law preserve the legitimacy of adjudication that partly relies, as may be recalled, on the fact that legal normative analyses are always situated in specific human contexts.70 *

*

*

Finally, the third important distinction between the doctrinalist and the realist approaches to legal taxonomy relates to the possible relationships between different legal categories. Doctrinalists regard legal categories as necessarily autonomous and mutually exclusive, so that ‘the classified answer to a question must use categories which are perfectly distinct one from another’.71 Because the project of legal taxonomy is for them 66 Oliphant, n 19 above, 73–4, 159. See also Fisher, n 64 above, 272–3, 275. Joseph Raz’s analysis of the distinguishing cases phenomenon brings home a similar point: n 20 above, 183–97. 67 See P Berger, B Berger and H Kellner, The Homeless Mind: Modernization and Consciousness (New York, Vintage Books, 1973) 63–82. 68 See M Walzer, Spheres of Justice: A Defense of Pluralism and Equality (New York, Basic Books, 1983); E Anderson, Value in Ethics and Economics (Cambridge, MA, Harvard University Press, 1993); E Anderson, ‘Pragmatism, Science, and Moral Inquiry’ in R Fox and R Westbrook (eds), In the Face of Facts (Cambridge, Cambridge University Press, 1998) 10, 17. 69 See Dagan, n 45 above, 1558–65; R Kreitner, ‘Fear of Contract’ (2004) Wisconsin Law Review 429, 461–78; Rakoff, n 38 above, 219, 222, 225; F Schauer, ‘Prediction and Particularity’ (1998) 78 Boston University Law Review 773; A Schwartz, ‘The Default Rule Paradigm and the Limits of Contract Law’ (1994) 3 Southern California Interdisciplinary Law Journal 389, 415–19. 70 To be sure, realists need not dispute—and should not ignore—the downside of categories which are too small: that there may be too many of them and that litigation will simply be about which of the multiple of small categories each case fits into. They also do not offer any metatheory of the optimal size of legal categories. Instead, they simply argue that a pragmatic judgement, which considers both these difficulties and the problems of overgeneralisation emphasised in the text, pushes towards smaller categories than we currently employ. 71 P Birks, ‘Unjust Enrichment and Wrongful Enrichment’ (2001) 79 Texas Law Review 1767, 1794.

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analogous to the project of classifying natural features of our world, they see the idea of some overlaps between categories as seriously misguided.72 For the doctrinalist, the test of success for a legal taxonomy is precisely its success in generating a scheme where different categories, governed by differing principles,73 ‘stand in splendid isolation from one another in legal discourse’.74 The ideal taxonomy for doctrinalists is one that builds high walls of autonomy between legal categories, defines one normative ‘core’ per field and jealously safeguards the boundaries between distinct legal fields. By contrast, realist taxonomies live comfortably with some degree of overlap between categories. Realists are not alarmed or embarrassed by overlaps because they are not impressed by the doctrinalist claim that overlaps are conceptually impossible. They highlight the confusion resulting from the presupposition of this claim, namely, that the endeavour of legal classifiers is exogenous to the object’s character. They insist that, once this presupposition is set aside, complete autonomy becomes a rather extreme condition and should not, in any event, be the test of taxonomical success.75 Quite the contrary: in most cases some overlaps are perfectly acceptable, even desirable. In justifying and framing principles for one area of the law, explains Bruce Ackerman, ‘lawyers often find that principles governing [another area] are relevant to their problem’. Therefore, it should not be surprising to identify some relationships of dependence between legal categories, either through the subordination of one to the other or, as is probably more frequently the case, through mutual reciprocity, so that ‘either can be invoked as a source of argument in a lawyer’s evaluation of the other’.76 This seems a straightforward proposition for realists, emanating from the mundane observation that life is messy and that different contexts, while distinct in some senses, often raise overlapping normative concerns.77 Indeed, reciprocity, rather than autonomy, seems to be the name of the taxonomic game.78 Thus, for example, there are important continuities between the underlying concerns and methodologies of contract law and those of torts: the influential tort law search for the cheapest cost avoider is frequently translated into an analysis that prescribes contractual defaults

72 Ibid, 1781 (‘It is no more possible for the selected causative event to be both an unjust enrichment and a tort than it is for an animal to be both an insect and a mammal.’). 73 Weinrib, n 2 above, 39. 74 B Ackerman, ‘The Structure of Subchapter C: An Anthropological Comment’ (1977) 87 Yale Law Journal 436, 439. 75 Waddams, n 30 above, 226–7; Ackerman, ibid, 439; Samuel, n 30 above, 282–4. 76 Ackerman, ibid. 439. Cf Waddams, n 30 above, 110, 112, who confuses in this context governing principles and legal categories. 77 See Feinman, n 26 above, 689. 78 See also Waddams, n 30 above, 1–2, 7.

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by attaching liability to the party who is the least cost bearer.79 At times, torts scholars helpfully use a contractarian approach (looking, to be sure, to a hypothetical contract behind some veil of ignorance) to justify an existing or suggested tort doctrine.80 Correspondingly, some doctrines, such as product liability law, resist easy pigeonholing into either contracts or torts.81 These overlaps imply neither the death of contract82 nor the death of torts.83 Rather, the lack of clear doctrinal boundaries separating these fields and the multiple overlaps in the system simply reflect the realist discount of the aesthetic appeal of doctrinal autonomy and the realist welcome of cross-boundary borrowings whenever they can facilitate the contextual normative analysis of law.84 Some may worry that overlaps destroy the point of taxonomy: once a legal category lacks the strong coherence of principle envisioned by the ideal of doctrinal autonomy, it is no longer helpful.85 This worry, however, is exaggerated. To be sure, a degree of overlap that destroys any possibility of sensibly producing normative, and thus doctrinal, recommendations about any given legal category would indeed take the bite out of the taxonomical project. But the realist case for accommodating (indeed celebrating) overlaps does not take this extreme position, and this chaotic predicament is definitely not the only alternative to strict doctrinal autonomy. Some overlaps between legal categories need not destroy the common denominators, the family resemblances holding together the rules of any given legal category.86 As long as these common denominators are 79 See R Scott and D Leslie, Contract Law and Theory (Charlottesville, VA, Michie, 2nd edn, 1993) 19. 80 For two very different examples, see A Schwartz, ‘Proposals for Products Liability Reform: A Theoretical Synthesis’ (1988) 97 Yale Law Journal 353; Keating, n 53 above. 81 See M Shapo, The Law of Products Liability (Salem, NH, Butterworth Legal Publishers, 3rd edn, 1994) lxxvii. 82 See G Gilmore, The Death of Contract (Columbus, OH, Ohio State University Press, 1974). 83 See also H Dagan, ‘Property and the Public Domain’ (2005) 17 Yale Journal of Law & The Humanities 84, 90 note 26 (‘Similarly to the unavoidable relationship of reciprocity between marital property law and other areas of both family law and property law, the law of creativity is rightly allied not only with fields of law that deal with speech, culture, and learning, but also with the more traditional areas of property law.’) 84 See H Dagan, The Law and Ethics of Restitution (Cambridge, Cambridge University Press, 2004) 34. 85 This is the claim of some unjust enrichment sceptics who argue that the failure of unjust (or unjustified) enrichment to serve as the guiding principle of the law of restitution implies that there is no good reason to retain (or revive) restitution as an important legal category. See, eg P Jaffey, ‘Two Theories of Unjust Enrichment’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (Oxford, Hart Publishing, 2005) 139. This claim frequently presents property, contract and tort law as legal fields that provide the strong coherence of principle that restitution lacks, concluding that it is better to think of restitution as an element of one or more of these fields. See, eg S Hedley, ‘Unjust Enrichment: A Middle Course?’ (2002) 2 Oxford University Commonwealth Law Journal 181, 194–5. 86 Cf K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in Neyers et al, Understanding Unjust Enrichment, ibid, 79; Feinman, n 26 above, 678, 699.

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thick enough to yield sufficiently robust normative (and thus doctrinal) recommendations, holding on to the legal category is (realistically) justified.87

V

CO N C L U S I O N

Legal taxonomy is frequently portrayed as necessarily a formalist (or doctrinalist) endeavour, which realists are likely to dismiss.88 This common wisdom is both mistaken and unfortunate. It is mistaken because realists should have a keen interest in the enterprise of legal categorisation. Realists need not, to be sure, subscribe to the (doctrinalist) idea that the purpose of taxonomy is to organise the given terrain of legal rules. Rather, they can and indeed should reconstruct the role of taxonomy so as to incorporate their insights on the inherent dynamism of law and the important function of contextual normative analysis in the evolution of legal categories. This reconstruction implies that the main goals of legal categories are to consolidate people’s expectations and to express law’s ideals with respect to distinct types of human interaction. Recasting legal categorisation in these terms dramatically changes the nature of the taxonomic enterprise. Rather than aiming at the refinement of some eternal descriptive truths, legal taxonomy in its realist rendition is an ongoing enterprise constantly reinventing itself. Rather than seeking to transcend context, realist taxonomies are sensitive to context and seek to generate relatively narrow legal categories. Finally, rather than aspiring to produce a map of mutually exclusive legal categories, a realist legal taxonomy recognises and accommodates substantial (although never overwhelming) overlaps among the various legal categories.

For an example dealing with the law of restitution, see Dagan, n 84 above, 35. Or worse, to present as subject to constant renegotiation between competing power-wielding lawyers. See H Collins, ‘Legal Classifications as a Production of Knowledge System’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon, 1997) 57, 68. 87 88

9 Contract and Unjust Enrichment: Competing Categories, or Complementary Concepts? CONTRACT AND UNJ US T ENRI CHMENT

STEPHEN WADDAMS * S TEPHEN WADDAMS

P

ETER BIR K S , p er h a p s more than any other writer, consistently emphasised the independence of unjust enrichment as a source of obligation, and particularly its independence from contract law. This was a necessary part of his repudiation of the former subordination of unjust enrichment to contract, and promotion of the scheme of classification that he favoured (consent, wrongs, unjust enrichment, other events). No one would now dispute the independence of the concepts of contract and unjust enrichment. Nevertheless, though separate, the concepts are interrelated, and Birks did not say that the one has had nothing to do with the other. In a paper published in 1997, Hector MacQueen, writing in relation to Birks’s ideas, while recognising as a starting point the separate nature of the basic concepts, wrote that it would be a poor lawyer who was not fully aware of the interaction between contract and unjustified enrichment, and it is absolutely necessary . . . to treat the two together at some stage . . . Enrichment cannot ignore contract, any more than contract can enrichment.1

MacQueen was writing of Scots law, but, it is suggested, the same is true also of Anglo-Canadian law. More recently, Gerard McMeel has said that ‘a continuing intense relationship between the two sources of obligation is inevitable’.2 * Goodman/Schipper Professor of Law, University of Toronto. I am grateful to John McCamus for comments on an earlier version of this essay. 1 H MacQueen, ‘Contract, Unjustified Enrichment and Concurrent Liability: a Scots Perspective [1997] Acta Juridica 176 (reprinted in F Rose (ed), Failure of Contracts (Oxford, Hart Publishing, 1997) 199, 207–8). 2 G McMeel, ‘Unjust Enrichment, Discharge for Breach, and the Primacy of Contract’ in A Burrows and Lord Rodger of Earlsferry (eds), Mapping the Law: Essays in Memory of Peter Birks, (Oxford, Oxford University Press, 2006) 223, 224.

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The two concepts interact in several ways, and for several reasons. One cause of interaction is that questions of unjust enrichment have often arisen in a contractual setting. In the leading case on unjust enrichment, Lord Mansfield said, in a very much quoted passage:3 This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies only for money which, ex aequo et bono, the defendant ought to refund . . . [I]t lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express or implied); or extortion; or oppression; or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.

Each of the instances given by Lord Mansfield commonly (though not, of course, always) arises in a contractual setting, and inevitably raises the question of the relevance to the mutual rights and obligations of the parties of the contract between them. A second reason for the interaction of the two concepts is that avoidance of unjust enrichment has been one of the effects of contract law itself. MacQueen gives several examples of instances where contract rules operate ‘to prevent enrichment of one side at the expense of the other’, suggesting that avoidance of unjust enrichment is one of the roles, goals, consequences or functions of contract law.4 Such instances are readily found also in Anglo-Canadian law: the contractual doctrines of misrepresentation, mistake, frustration, duress, undue influence, unconscionability and rectification, the implication of terms that are fair and reasonable, the avoidance of forfeitures, the doctrine of part performance under the Statute of Frauds, the control of the power to terminate for breach, the willingness to stretch the doctrines of contract formation where benefits have been conferred, the reluctance to find a contract to be illegal where benefits have been conferred under it, the willingness in some cases to enforce contracts for the benefit of third parties and the determination of the scope of the appropriate remedy for breach. All these doctrines have sometimes been employed in order to avoid what would otherwise be perceived as an unjust enrichment.5 These are not usually classified as ‘restitution cases’ or ‘unjust enrichment cases’, nor am I suggesting that they should be so classified, but this does not mean that the general concept of unjust enrichment has been irrelevant. Where a benefit is conferred under a valid and enforceable contract, there are some circumstances in which a claim for restitution of the benefit Moses v Macferlan (1760) 2 Burr 1005, 1012 (KB). MacQueen, n 1 above, 216, 217, 223, 224. See S Waddams, ‘Restitution as Part of Contract Law’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Oxford University Press, 1991) 197. 3 4 5

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on the ground of unjust enrichment will be excluded, but there has been a very marked variation in attempts to formulate a principle or rule to give effect to this idea. Some formulations go so far as to assert that the mere existence of a contract between the parties automatically excludes any restitutionary claim: [T]here has to be a rule of the effect that, at least unless and until the contract is prematurely discharged by frustration or in reaction to a repudiatory breach, the plaintiff can never put himself in a better position by suing in unjust enrichment rather than in contract.6 There is a universal rule which forbids claims in unjust enrichment when there is a subsisting contractual relationship between the parties.7 It is only when the agreement does not operate or has ceased to operate that the law of restitution should have a role to play in any dispute between the parties.8

Other formulations suggest that the restitution claim is excluded whenever the benefit is conferred ‘in pursuance of’, ‘in fulfilment of’ or ‘under’ the contract: It is a fundamental principle of the law of restitution that, if the claimant wishes to recover a benefit which has been transferred to the defendant pursuant to a contract, the claimant must first establish that the contract has ceased to be operative.9 It is a basic tenet of the law of restitution that no recovery can be had for benefits conferred in fulfilment of a valid obligation owed to the recipient. The proposition seems self-evident.10 Where a benefit has been conferred under a binding contract which cannot be rescinded, brought to an end, or rectified, the claimant must seek his remedy under the contract and not in restitution.11 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985) 46–7. L Smith, ‘The Mystery of “Juristic Reason”’ (2000) 12 Supreme Court Law Review 237. But compare the more complex and nuanced analysis in L Smith, ‘Property, Subsidiarity, and Unjust Enrichment’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 588, 615: ‘To say that there can be no claim in unjustified enrichment so long as there is a subsisting contract is to make a slightly inaccurate generalisation by aiming at a false target.’ See also L Smith, ‘Demystifying Juristic Reasons’ (2007) 45 Canadian Business Law Journal 281. 8 G Virgo, The Principles of the Law of Restitution (Oxford, Oxford University Press, 1999; 2nd edn, 2006) 40. 9 G Virgo, ‘Failure of Consideration: Myth and Meaning in the English Law of Restitution’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 103, 109. 10 D Friedmann, ‘Valid, Voidable, Qualified, and Non-existing Obligations: an Alternative Perspective on the Law of Restitution’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Oxford University Press, 1991) 247–8. 11 R Goff and G Jones, The Law of Restitution (London, Sweet & Maxwell, 1966) 21 (printed as a black-letter rule). In the second edition (1978) 26 (not in black letter): ‘under a 6 7

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If . . . money is paid under a contract, the contract must have been discharged [before there can be restitution].12 He [the plaintiff] must not bring the [non-contractual] claim unless and until the contract is discharged.13

A Tentative Draft of the Third Restatement (2004) speaks of:14 one of the axioms of the law of unjust enrichment, according to which the measure of value between parties to a valid contractual exchange is definitively fixed by their agreement. It follows that performance pursuant to a valid contract cannot result in the unjust enrichment of either party . . . The fundamental primacy of contract over restitution . . . is accurately expressed in more concrete terms by familiar judicial statements to the effect that ‘where there is a contract, there can be no unjust enrichment’ . . . Properly understood . . . these rules of thumb embody the most elementary limit to liability in restitution: namely, that an enrichment derived from a valid consensual exchange is neither unjust nor unjustified.

Some of these formulations are quite similar; on the other hand, some differ from each other in ways that might be very significant when the supposed rule came to be applied to particular facts. The variation in the formulations, and in some cases reformulations by the same writer, casts doubt on assertions that any one of them is necessary, axiomatic, a fundamental principle, familiar, a rule of thumb, most elementary, self-evident, a basic tenet or universal. As elsewhere in legal discourse, the use of such forceful assertions itself suggests reason to doubt them. Axioms, fundamental principles, universal truths and self-evident propositions should not be multiplied beyond necessity. Other formulations have been more flexible. In their careful discussion of the question, Peter Maddaugh and John McCamus speak of the well-established idea that it would be open to the defendant in any restitution case to prove that the plaintiff should not recover because the benefits had been conferred by the plaintiff under a valid contract

but they go on to point out that restitution has been available in cases where the claimant mistakenly overpays, and where ‘an event has occurred valid contract’. In the sixth edition (2002) 50–52, the corresponding passage reads: ‘However, if the contract is not terminated, the parties to it must seek their remedy under the contract, and not in restitution. Their rights and duties are governed by the contract.’ 12 J Beatson, The Use and Abuse of Unjust Enrichment (Oxford, Oxford University Press, 1991) 3. 13 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985) 288. ‘Contractual’ appears in the text, unchanged in the revised edition, but it is evident from the context that ‘non-contractual’ is intended. 14 American Law Institute, Restatement of the Law: Restitution and Unjust Enrichment, Tentative Draft No 3 (2004) 298–9.

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that was not within the contemplation of the terms of the agreement’, even though the contract remains valid and has not been rescinded or terminated.15 An earlier formulation, relied on by Robert Goff and Gareth Jones in their first edition, was that of the first Restatement of Restitution:16 A person . . . who pursuant to a contract with another, has conferred a benefit upon him, is not entitled to compensation therefor other than in accordance with the terms of such bargain, unless the transaction is rescinded for fraud, mistake, duress, undue influence or illegality, or unless the other has failed to perform his part of the bargain.

The crucial phrase here, ‘other than in accordance with the terms of such bargain’, is susceptible of two different meanings. It might mean that the claim fails unless the claimant can show a positive contractual right to repayment; or it might mean that the claim fails only where it is inconsistent with a term of the contract that actually excludes the claim. The distinction is significant, for very often the contract is silent on the question. Professor Jack Beatson (now Mr Justice Beatson) suggested in 1999 that it should, in principle, be possible to bring a restitutionary claim where it would not reallocate risks or reassign value as an alternative to an action for breach of contract even before discharge.17

He went on to suggest that while . . . before discharge a restitutionary claim will very often be in direct conflict or inconsistent with a contractual one or that it would in effect nullify the contractual obligation, [it is not established that] this is necessarily so as a matter of analysis in all cases.

This was accepted by Birks, who, having described the ‘orthodox’ doctrine as that ‘an enrichment transferred under a valid contract cannot be recovered unless the contract is rescinded or terminated’, wrote in 2002: 18 Professor Beatson has argued, rightly, that a more sophisticated analysis would conclude that the bar is not absolute. In particular he says that a distinction should be drawn between cases in which restitution would disturb legitimate hopes and fears inherent in the bargain and others where it would not. In the 15 P Maddaugh and J McCamus, The Law of Restitution (Toronto, Aurora, looseleaf edn, 2005) 3:200.30, with reference to James More & Sons Ltd v University of Ottawa (1974) 49 DLR (3d) 666 (Ont HC). 16 American Law Institute, Restatement of Restitution (1937) s 107. 17 J Beatson, ‘The Temptation of Elegance: Concurrence of Restitutionary and Contractual Claims’ in W Swadling and G Jones, The Search for Principle: Essays in Honour of Lord Goff of Chieveley (Oxford, Oxford University Press, 1999) 143, 153, 154; J Beatson, ‘Restitution and Contract: Non-Cumul?’ (2000) 1 Theoretical Inquiries in Law 83, 94–6. 18 P Birks, ‘Failure of Consideration and its Place on the Map’ (2002) 2 Oxford University Commonwealth Law Journal 1, 5.

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latter the orthoidox rule should give way. That seems to be exactly the right way to approach this case [that is, Roxborough v Rothmans of Pall Mall Australia Ltd.19]

Though later writings by both Beatson and Birks seem less sure on the point,20 I would support the views just quoted, which I think are consistent with those of Maddaugh and McCamus. Looking at the matter from the point of view of principle, a valid claim for restitution based on unjust enrichment should not be defeated by the mere presence of a contract between the parties. Let it be admitted that the claim can be defeated if it is excluded by a valid contract, but the mere existence of a contract between the parties is not sufficient to bring about this result, any more than the mere existence of a contract excludes a tort claim. A valid contract may modify obligations arising from any source, but only if that is, on a proper interpretation, the actual effect of the contract. In this sense, but in this sense only, it is true to say that contract may ‘trump’ other sources of obligation.21 An otherwise valid unjust enrichment claim should therefore be excluded if, but only if, the contract, by its terms (express or genuinely implied), entitles the recipient to retain the benefit. No complicated reason is needed to justify this conclusion: a valid contract should be enforced, but, in interpreting the contract, it should not lightly be inferred that its effect is to exclude an otherwise justified restitutionary claim. In terms of ‘juridical reason’, the contract supplies a juridical reason for the enrichment if, but only if, it can fairly be interpreted to entitle the recipient to retain it. Perhaps the most significant of Lord Mansfield’s instances, quoted above from Moses v Macferlan, is money paid ‘upon a consideration which happens to fail’. Since the mid-nineteenth century, contract lawyers have used the word ‘consideration’, as a criterion of enforceability, to mean value given or promised in exchange for the promise sought to be enforced. It is evident that Lord Mansfield was using the word in a quite different sense, and it has often been said, by way of glossing his phrase, that consideration there meant contractual performance. However, it is very probable that Lord Mansfield was using the word in a still wider sense, to mean the reason or basis for the making of the payment. The passage was so understood by Sir William Evans, who equated it with the declaration causa data causa (2001) 185 ALR 335 (HCA). P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2003) 107–9; P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn, 2005) 124; J Beatson and G Virgo, ‘Note’ (2002) 118 LQR 356. 21 This point has been made by G Mead, ‘Restitution Within Contract?’ (1991) 11 Legal Studies 173; A Tettenborn, ‘Subsisting Contracts and Failure of Consideration—a Little Scepticism’ [2002] Restitution Law Review 1; G McMeel, n 2 above; S Waddams, ‘The Relation between Contract and Unjust Enrichment’ in P Giliker (ed), Re-examining Contract and Unjust Enrichment: Anglo-Canadian Perspectives (Amsterdam, Martinus Nijhoff, 2007) forthcoming. 19 20

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non secuta of Roman law,22 and was understood in this sense also in the mid-nineteenth century, and applied outside the contractual context.23 Birks, writing in 1985, also understood the word in this wide sense, likewise making the link with Roman law:24 The link between ‘consideration’ and contracts makes it easy to suppose that ‘total failure of consideration’ must always refer to a failure in contractual reciprocation, whereas in fact that is only the most common species of the genus so described. In the law of restitution the word ‘consideration’ should be given the meaning with which it first came into the common law. A ‘consideration’ was once no more than a ‘matter considered’, and the consideration for doing something was the matter considered in forming the decision to do it. In short, the reason for the act, the state of affairs contemplated as its basis. Failure of consideration for a payment should be understood in that sense. It means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself. [The language of the Digest for the same phenomenon is causa data causa non secuta (things given upon a consideration, that consideration having failed)].

Failure of consideration may arise, therefore, entirely outside any contractual context, but nevertheless it is often associated with contracts. In the Australian case of Roxborough v Rothmans, mentioned earlier, a retail seller of cigarettes paid to the wholesaler, as part of the price but separately identified and quantified, an amount of money in respect of a tax thought to be payable by the wholesaler to the government. The tax turned out to be invalid, and the retailer claimed repayment of the money paid for that purpose. Sometimes in such cases a persuasive argument can be advanced that there is an implied term that, in the circumstances that have occurred, the money should be repaid. This argument was indeed accepted by one of the majority judges,25 but rejected by the others. Nevertheless the claim succeeded on the ground of failure of consideration. The argument for restitution is that the money in question was paid for a particular purpose that had failed to materialise, and so was paid ‘upon a consideration which happen[ed] to fail’; the contract could not be construed expressly or impliedly to exclude a claim for restitution, and consequently the claim succeeded. Of course, there is room for disagreement on how the contract should be interpreted, but this is no more difficult than other everyday problems of interpretation. A relevant test would be to ask whether, if money corresponding to the tax had not yet been paid when the tax was declared 22 W Evans, An Essay on the Action for Money Had and Received (1802) 25, reprinted [1998] Restitution Law Review 1, 9. 23 Martin v Andrews (1856) 7 El & Bl 1 (QB) (money paid for anticipated expenses of subpoenaed witness; expenses not incurred). 24 P Birks, An Introduction to the Law of Restitution (Oxford, Oxford University Press 1985) 223 and note. 25 Callinan J.

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invalid, the retailer would have been obliged to pay it. In this context, the question would appear as one of contractual interpretation (not unjust enrichment): did the parties in substance agree on an overall gross price, with the separation of the tax element shown just for information, or was the agreement in substance for two distinct payments for two distinct purposes? The matter is perhaps not entirely free from doubt, but most courts and commentators would probably conclude that, if the payment had not been made before trial, the wholesaler’s claim for the tax element would have failed, that is to say that in the circumstances the payment of the tax element was not, as a matter of contractual interpretation, due. The grounds on which restitution was sought on the facts of the Roxborough case (disappearance of the reason for the payment) are in substance identical to the grounds on which, if the money had not been paid, it would have been argued that payment was not, as a matter of contractual interpretation, due. A consistent result in the two cases is, to say the least, highly desirable. It would be anomalous for the result to vary according to whether the payment was made just before or just after the declaration of the invalidity of the tax, for this would make the substantive rights of the parties depend on accidents of timing.26 If it is accepted that a payment not yet made would not, under the terms of the contract, have been due, this tends to support the court’s conclusion that the payment in respect of the tax was, on the actual facts of the Roxborough case, made upon a consideration that had failed. To suggest an analogy, it would be like a monthly payment made to an agent, consisting of a fee for service and reimbursement for the expense of an anticipated monthly trip from London to the principal’s New York office. The New York office unexpectedly closes and the expense is no longer necessary. Unless the contract clearly provided otherwise, the expense payments would cease for the future and prepayments would be recoverable. Payment of fees and repayment of disbursements are generally regarded as separable items in a running account. The question raised here is not whether the payment was due under the original contract, but whether payment would have been due if it had not been made and the matter were now (at time of trial) in dispute, in the light of the events now known to have occurred. In the not uncommon case where a buyer of goods or services agrees to pay the price in advance of delivery and then defaults, the seller is entitled to damages, but not to the price unless property has passed to the buyer, or the contract is specifically enforceable, or it was validly agreed that the price should be paid as a 26 This was the objection to the result in Chandler v Webster [1904] 1 KB 493 (CA), and the substantial reason why the case was overruled in Fibrosa Spolka Acjyna v Fairbairn, Lawson, Combe, Barbour Ltd [1943] AC 32 (HL).

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deposit to be forfeited on default.27 These exceptions show that the crucial question is not whether the payment was due under the original contract (plainly it was), but whether the parties agreed, on a fair interpretation of the contract, that the seller should, in the circumstances now known to have occurred, be entitled to retain the payment if made, or to demand it if not. This is a question of contractual interpretation, but in seeking the answer the court is bound to consider whether the buyer would have been entitled to restitution if the payment had actually been made because, if the answer to that question is yes, it must follow that the disputed payment is not, as a matter of contract law, now due. The law cannot recognise a contractual right to a payment which, when made, creates an instant right to restitution. The corollary is that where the payment has actually been made, the court must consider whether, if the money had not been paid, the seller would have had a contractual right to demand it, because again, if the answer is yes, it must follow that restitution is excluded.28 If the answer is no, it is desirable that restitution should be available, because otherwise the result will depend on an accident of timing, and the buyer who pays in advance as promised will be less favourably treated than the buyer who defaults. The same point may be illustrated from the hypothetical example earlier given of an agent’s travel expenses. A principal agrees to pay an agent a sum of money on 1 May for anticipated travel to a meeting on 1 June. On 15 May, the meeting is cancelled. If the money has been paid on 1 May, the question is whether the principal has a right to restitution; if the payment has not been made, the question is whether the contract, properly interpreted, entitles the agent to the payment in the light of the fact now known that the travel will not occur. It is possible to imagine a dispute over the interpretation of the contract, but, whichever interpretation prevails, it is desirable that the results should correspond in the two cases supposed. The principal who conscientiously and trustingly pays in advance should not be treated worse by the law than the principal who delays in making the payment. Where money is paid in advance by a buyer, as in Dies v British & International Mining and Finance Co,29 the buyer, even though in default, 27 If the full price is paid in advance and the buyer then repudiates the contract, the price is recoverable, subject to the seller’s claim for damages (Dies v British & International Mining Finance Corp Ltd [1939] 1 KB 724 (HC) and American Law Institute, Third Restatement of Restitution and Unjust Enrichment, Tentative Draft No 3 (2004) s 36). It must follow that if the buyer promises to pay the price in advance and fails to do so, then the seller is not entitled to the price. It has sometimes been suggested that the seller could refuse to accept the repudiation and retain the price (if paid) or recover it (if not). White & Carter (Councils) Ltd v McGregor [1962] AC 413 (HL Sc) might possibly be read to support this view, but the case has been much criticised and is not likely to be extended, or followed in other jurisdictions. 28 Chandler v Webster, n 26 above, had at least the merit of consistency on this point. 29 [1939] 1 KB 724, Third Restatement of Restitution and Unjust Enrichment, Tentative Draft, s 36.

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is entitled to restitution, subject to any counter-claim for breach of contract, unless the contract can be construed to amount to an actual agreement for forfeiture of the prepayment. Since the law usually leans against forfeiture, and the prepayment in the Dies case was not described as a ‘deposit’ or by any equivalent word, the conclusion (justifiable, in my opinion) was that the overpayment (that is, the excess of the payment over the damages for breach) should be restored. Again where, as in Sumpter v Hedges,30 valuable benefits other than money are conferred, there is a strong argument for restitution, even where the claimant is in default, unless the contract can be construed as actually entitling the recipient to retain the benefit without payment. Some such contracts can be fairly construed to have this effect, for example a contingency contract such as, possibly, in Cutter v Powell,31 where in exchange for a very high reward for success the claimant agrees to receive nothing in case performance is incomplete, but not all contracts can fairly be construed to have this effect, and it seems doubtful that the contract in Sumpter v Hedges could be so construed.32 In a case like Dies, where a buyer prepays a large proportion of the price and then defaults, if there is an express forfeiture clause (or if the prepayment is called a ‘deposit’) it is generally accepted that the court will, at least where the amount greatly exceeds a reasonable deposit, grant relief against the forfeiture clause and order restitution of the prepayment, subject to the seller’s cross-claim for damages for breach of contract.33 We speak of ‘setting aside’ or ‘granting relief against’ a forfeiture clause. These are negative concepts from the contractual point of view, which do not, by their own terms, present reasons for restitution. But of course it is always taken for granted that the two go together. The setting aside of the forfeiture clause always implies a right to restitution of the money paid. It would be incoherent to say that the court relieves against forfeiture but will not give restitution. Let us suppose a case in which relief would be given against an express forfeiture clause and imagine the same case, with the same prepayment but without the forfeiture clause, as in the Dies case. The same result must follow (that is, restitution of the prepayment). It would be quite incoherent for the law to set aside an express forfeiture clause but to refuse restitution of a similar prepayment where there was no forfeiture clause: this would be to relieve against a forfeiture where the parties had agreed to it, and to enforce a forfeiture where they had not. This example shows that [1898] 1 QB 673 (CA). (1795) 6 TR 320 (KB). But a contrary view is taken by B McFarlane and R Stevens, ‘In Defence of Sumpter v Hedges’ (2002) 118 LQR 569. 33 Stockloser v Johnson [1954] 1 QB 476 (CA); Workers Trust & Merchants Bank Ltd v Dojap Investments Ltd [1993] AC 573 (PC). 30 31 32

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payments made under a valid contract are sometimes recoverable for reasons related to unjust enrichment. We are surely on the wrong track if we seek to classify this issue as exclusively contract or exclusively unjust enrichment: the ideas are interdependent. Opinions have differed on whether unjust enrichment is subordinate, secondary, supplementary or subsidiary to contract law.34 Where the forfeiture clause is adjudged valid, it could be said, certainly, that contract prevails, but unjust enrichment is not irrelevant because the assessment of the validity of the clause itself involves considerations of unjust enrichment. The validity of the clause is judged by weighing the considerations that favour enforcement of contracts against the desirability of avoiding the unjust enrichment that would be effected by an extravagant forfeiture. Where the claimant is entitled to restitution, whether to avoid a forfeiture or a result that is otherwise unconscionable, or for undue influence, or for duress, it could be said that unjust enrichment prevails over contract, because entitlement to restitution necessarily implies that the contract is unenforceable. No contract can be valid if performance of it would give rise to an immediate right to restitution.35 The phrase ‘implied term’ has been used in contract law with several different meanings.36 Sometimes it means what the parties actually agreed; sometimes what they would probably have agreed if they had contemplated the issue that has arisen; very often it means what reasonable persons would have agreed if they had contemplated the issue in question. The meanings have overlapped in application because it is easy to presume that contracting parties intend what is reasonable, and this presumption creates a convenient correspondence between the intention of the parties and the justice of the result. The last meaning (what reasonable persons would have agreed) necessarily imports the court’s own sense of justice, for a writer (court or commentator) of course attributes to hypothetical reasonable persons an agreement that leads to a fair, just and reasonable result. By these means, terms have often been implied into contracts in order to avoid what would otherwise be an unjust enrichment. Lord Goff said, in a case of advance hire paid under a charterparty for periods in which the hire was not due, that 34 See R Grantham and C Rickett, ‘On the Subsidiarity of Unjust Enrichment’ (2001) 117 LQR 273: ‘While the law of unjust enrichment is a core doctrine of the private law, it is a subsidiary doctrine’; L Smith, ‘Property, Subsidiarity, and Unjust Enrichment’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 588, 615: ‘It begins to appear that unjustified enrichment is not actually subsidiary to contract law. Rather, it is excluded by an operative distribution of risks and benefits’; and H MacQueen, ‘Unjustified Enrichment in Mixed Legal Systems’ [2005] Restitution Law Review 21, 33: ‘A general test of subsidiarity seems to pose more questions than answers.’ 35 See J Beatson, ‘Duress as a Vitiating Factor in Contract’ [1974] Cambridge Law Journal 97, 106–8. 36 Leaving aside, in the present discussion, terms implied by law.

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even in the absence of [an] express contractual provision advance hire which proves to have been paid in respect of a period during which the vessel was rendered off hire under a term of the contract must ordinarily be repaid, and if necessary a term will be implied into the contract to that effect.37

Lord Goff went on to say that the existence of the agreed [contractual] regime renders the imposition by the law of a remedy in restitution both unnecessary and inappropriate.38

His conclusion, therefore, was that restitution and contract were to be kept distinct in this case, but his reasoning demonstrates their mutual interdependence: a remedy in restitution is unnecessary precisely because contract law resolves the question in accordance with all relevant considerations of justice, but, where the parties have not dealt with the matter expressly, the court will imply a contractual term for repayment if necessary, and what makes such an implication ‘necessary’ is evidently closely related to the avoidance of unjust enrichment. It will be seen from this discussion that there is a complex interrelationship between implied terms in contracts and unjust enrichment. In an era when unjust enrichment was not recognised as an independent cause of action, the technique of implied terms was often used to avoid an unjust enrichment. The more recent recognition of an autonomous cause of action for unjust enrichment does not invalidate these cases. Courts, in interpreting contracts, continue to imply terms for several reasons, one of which continues to be the avoidance of unjust enrichment. The availability of an autonomous cause of action where restitution is claimed of a benefit conferred cannot remove the necessity of interpreting the contract, which will be the only approach available where the dispute arises before the benefit has been conferred. As suggested earlier, it is very desirable for the two approaches to be in harmony, so that the result does not vary according to the accident of prepayment. Unjust enrichment cannot therefore displace contract on this issue, any more than contract can displace unjust enrichment. Where the payment in question has been made before trial it is sometimes possible for a claim for restitution to succeed on the basis of an implied term that the money should be repaid, as is shown by the judgment of Callinan J in the Roxborough case; that this is a difficult argument is shown by the majority judgment in the same case. It is often difficult for the claimant to show a positive implied term that money should be repaid in circumstances that the parties, ex hypothesi, had not contemplated, and the implication of such a term can rarely be described as a business necessity; it should be sufficient for the claimant to show that there was no term (express or genuinely implied) Pan Ocean Shipping Ltd v Creditcorp Ltd [1994] 1 WLR 161, 164 (HL) (emphasis added). Ibid. Crucial aspects of the Pan Ocean Shipping case were the insolvency of the shipowner and the assignment of the disputed payment to a third party: ibid, 166 per Lord Goff. 37 38

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that the money should be retained, a test that should correspond, as suggested earlier, with a showing that the money (if not yet paid) would not, in the circumstances, have been payable under the contract. In this way the concepts of implied term and unjust enrichment can work in harmony, and the right to retain the payment will not depend on an accident of timing. A legal rule that prevents an unjust enrichment (the implied term) can thus correspond with a rule that reverses the same enrichment if it happens already to have occurred (restitution for unjust enrichment). In 2002, Ewan McKendrick identified, as an unresolved taxonomic issue, the question of whether rescission is a contractual remedy or a restitutionary remedy.39 This way of putting the question implies that the answer must be exclusively one or the other. In his last book, Peter Birks wrote:40 Similarly, where a contract is voidable ab initio, as for instance for misrepresentation, pressure, or undue influence, it is the voidability of the contract which shows that the basis of the enrichment has failed. The power to terminate in the one case [ie for repudiatory breach] and the power to rescind and revest in the other arise from the unjust enrichment precipitated by the invalidity. They are the means of reversing it. If you obtain my car by misrepresentation, the contract between us is immediately invalid. Because your receipt of the car lacks a valid basis, I am entitled to restitution.

Robert Stevens interpreted this passage to mean that Birks was allocating rescission exclusively to unjust enrichment:41 For him [Birks] the right to rescind a contract for misrepresentation, duress or undue influence is a right arising as a result of unjust(-ified) enrichment even where the contract is wholly executory. Birks argues that there is an absence of basis prior to avoidance . . . [H]e sees rescission (in my view correctly) as part of the law of unjust(-ified) enrichment.

Andrew Tettenborn also read the passage to mean that ‘rescission is a form of restitution’.42 It seems to me doubtful that Birks intended to exclude rescission from contract law. In 1997 he had written:43

39 E McKendrick, ‘Taxonomy: Does it Matter?’ in D Johnson and R Zimmerman (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 627, 656. 40 Unjust Enrichment (Oxford, Clarendon Press, 2003) 111, unchanged in 2nd ed (Oxford, Clarendon Press, 2005) 126. 41 ‘The New Birksian Approach to Unjust Enrichment’ [2004] Restitution Law Review 260, 272. 42 Ibid, 288. 43 P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (Oxford, Oxford University Press, 1997) 1, 34.

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A book on contract . . . would endanger its own utility and risk absurdity if it refused to discuss law relevant to contract merely because it was not strictly contractual in the sense of either defining the word ‘contract’ or constituting a response to that event. There is a strong conceptual argument for saying that all the law about rescission of contracts is not strictly contractual in that sense but is, rather, an operation of the law of unjust enrichment upon contracts. But it would be absurd for an author on contract who accepted that argument to exclude rescission from his book.

As this passage convincingly shows, from the point of view of a writer on contract law, rescission must be part of the subject. Since 1875 a ground on which the former court of equity would have granted rescission has been a defence to contractual obligation. The scope of defences to contractual obligation must be part of the subject. A writer or instructor on contract law could not plausibly say ‘contracts may be rescinded on various grounds, but I will not trouble you with what these are, since they belong to another branch of the law and are not our concern’. The principal grounds for rescission have been fraud, misrepresentation, mistake, undue influence, duress, and unconscionability. Rescission cannot be explained entirely in terms of unjust enrichment: rescission is available where a contract is purely executory (that is, where there has not yet been any enrichment), and rescission may be available where the values exchanged are equal (that is, where no enrichment would occur even if the contract were fully executed). It should be remembered also that rescission was equitable in origin, and not part of the common law of unjust enrichment or its predecessors. But considerations of unjust enrichment have been far from irrelevant. Prevention of unjust enrichment (in its general sense) was evidently one of the reasons why the court of equity intervened to grant rescission. One reason for adopting a rule permitting rescission for undue influence is that such a rule often tends to prevent unjust enrichment because experience shows that undue influence is very apt to cause unjust enrichment, though it does not always do so. The conclusion would be that Birks was right in 1997 when he suggested that rescission could not be entirely excluded from contract law, and right again in 2003 when he suggested that it could not be entirely excluded from the law of unjust enrichment. Rather than seeking to locate ‘rescission’ as though it were a single place on a map of separate continents, or a biological specimen to be allocated to only one species of two, it would be more realistic, and more consistent with history, to recognise that the legal phenomenon called ‘rescission’ has been influenced by the concepts both of contract and of unjust enrichment. Andrew Burrows put it well in saying that ‘rescission makes no clean divide between contract and restitution’.44 44 A Burrows, The Law of Restitution (Oxford, Oxford University Press, 1993) 126; (Oxford, Oxford University Press, 2nd edn, 2002) 169.

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There are many other issues on which the ideas of contract and unjust enrichment interact, but they cannot be discussed here in detail. One such issue is exemplified by the notoriously controversial California case of Boomer v Muir,45 where a builder who had completed most of the work under a disadvantageous contract was held to be entitled to recover the full value of the work after a breach by the owner, with the consequence that the builder recovered much more for part of the work than would have been due if the work had been fully completed. The effect was to exact a very large forfeiture from the defendant of the contractual benefits that had accrued before termination of the contract. The American Law Institute commented that this result was ‘plainly anomalous from a contract standpoint’,46 and Sir Guenter Treitel has called it ‘absurd’.47 The result in cases like Boomer v Muir is brought about by insistence on a strict separation of contract from restitution,48 and an exclusion of contractual considerations.49 The counter-argument, in brief outline, would be that, when both dimensions of the issue are taken into account, recovery at the contract rate can be supported as a minimum measure, fair to both parties and convenient to the court, but that recovery of a greater sum should require proof of actual loss. It is true that a money payment can be recovered where the counter-performance fails, even though it puts the plaintiff in a better position that would have been occupied if the contract had been performed, but a claim for the value of services is not exactly analogous, because whereas the value of money is certain and readily re-transferable, the retrospective valuation of services is often highly disputable, and may, in practice, lead to a disproportionate forfeiture. Another controversial issue that has become a kind of test case for discussing classification of obligations is the question of profit derived from wrongdoing. In some, though not all, cases of profit derived from tort or breach of contract the claimant has been successful in claiming all or part of the profit, even where this exceeds the loss suffered by the claimant (in the sense that the judgment puts the claimant in a better position than she would in fact have occupied if the wrong had not been done). These cases were, during the twentieth century, first enthusiastically 24 P 2d 570 (Cal App 1933) Dist C App, Cal). American Law Institute, Third Restatement of Restitution and Unjust Enrichment, Tentative Draft No 3 (2004) 328. 47 GH Treitel, The Law of Contract (London, Sweet & Maxwell, 11th edn, 2003) 1062. See also Taylor v Motability Finance Ltd [2004] EWHC (Comm) 2619, rejecting not only Boomer v Muir but any restitutionary claim at all. 48 ‘Two different remedies, proceeding on entirely different principles’: Renard Constructions Pty Ltd v Minister of Public Works (1992) 20 NSWLR 234, 277 (per Meagher JA) (NSWCA). 49 ‘A rescinded contract ceases to exist for all purposes’, 24 P 2d 570, 577 (Cal App 1933) This is not now accepted in relation to a contract terminated for breach, which excuses the innocent party from future obligations but does not obliterate the contract for all purposes. 45 46

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claimed by writers on restitution as instances of unjust enrichment and then equally enthusiastically repudiated as having nothing whatever to do with unjust enrichment. This is an issue on which leading scholars have differed and individual scholars have changed their minds. When we see such differences of opinion, with prominent contract and unjust enrichment scholars each seeking to push the issue into the other’s territory, should we not entertain the possibility that both views might be correct, that is, that we are in danger of setting up too rigid a dichotomy? Must this issue ‘belong’ exclusively to unjust enrichment or, on the other hand, exclusively to some other area of the law that entirely excludes considerations of unjust enrichment? Would it not be more accurate to say that the result in many cases—the Blake case,50 for example, where a secret service agent was required to account for profits derived from publishing unauthorised memoirs—has been influenced by considerations of both contract and unjust enrichment, together with considerations of wrongdoing, property, breach of fiduciary duty and public policy?51 Another issue on which the concepts of contract and unjust enrichment interact is the relation of both concepts to public policy. If a contract is unenforceable by reason of illegality, informality or incapacity, the question arises of a right to restitution of benefits conferred. It was suggested many years ago by John Dawson and George Palmer that, in the case of illegality, restitution should be permitted unless it would subvert the public policy underlying the unenforceability of the contract,52 and this view is supported by Maddaugh and McCamus.53 Considerations of contract and unjust enrichment interrelate here, and both interrelate with considerations of public policy. Many metaphors have been employed in discussing the mutual relation of concepts in private law. Legal concepts, or legal issues, have been envisaged as places on a map, branches of a tree, tributaries of a river or different animals in a scheme of biological classification. Metaphors are useful—perhaps unavoidable—in seeking to understand a complex subject, but, if pressed too far, they may cease to illuminate and begin to distort. The metaphors of mapping and of biological classification tend to emphasise the separation of legal concepts. This is a valuable insight that should be welcomed. Contract and unjust enrichment are, indeed, different concepts. But the metaphors ought not to be pressed too far. It would be Attorney General v Blake [2001] 1 AC 268 (HL). See S Waddams, Dimensions of Private Law: Categories and Concepts in Anglo-American Legal Reasoning (Cambridge, Cambridge University Press, 2003) ch 6. 52 J Dawson and G Palmer, Cases on Restitution (Indianapolis, IN, Bobbs-Merrill, 1958) 1018. 53 Maddaugh and McCamus, n 15 above, 15:700; P Birks,’Recovering Value Transferred under an Illegal Contract’ (2000) 1 Theoretical Inquiries in Law 155; P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2003) 215–17 (restitution available if it would not stultify policy underlying the non-enforcement of contract). 50 51

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misleading to say that the one concept has had nothing to do with the other: they have often worked together—sometimes in harmony and sometimes in tension—in resolving a variety of legal issues. Desirable as it is to emphasise their separation, it is necessary also to give attention to their interrelationship. Failure to do so has undesirable consequences: it tends to distortion of the past, and to the invention and application of legal rules unwarranted by history, logic, policy, good sense or justice.

10 The Creation of Entitlements through the Law of Restitution ENTI TLEMENTS I N RES TI TUTI ON

DANIEL FRIEDMANN * DANI EL FRI EDMANN

I

I NTRO DUCTION

I

N A R EC ENT article I pointed out that the law of restitution is essentially a remedial branch of the law.1 It is predicated on concepts of corrective justice and serves to vindicate and protect entitlements,2 the source of which is usually in another branch of the law. In this respect, restitution fulfils a function similar to that of the law of torts. But. while the law of torts deals with losses suffered by the owner of a legal entitlement caused by the act of another, the law of restitution is concerned with situations in which gains derived from the owner’s legal entitlement inure to the benefit of another person. The source of the entitlement which is protected by the law of torts and the law of restitution is ordinarily in another branch of the law, in most cases property law, contract law or the law of personality. The remedial branches of the law are not, however, merely ancillary to the legal entitlement: they serve an important function in the expansion of existing legal rights and in the developments of new entitlements. The historical role of the law of torts in the development of legal entitlements is well known.3 In the present essay I will concentrate on this aspect of the law of restitution, namely its effect upon the expansion of existing legal entitlements and its contribution to the development of new legal rights. * Minister of Justice, Israel, Formerly Professor of Law, Tel-Aviv University and the College of Management. 1 D Friedmann, ‘The Protection of Entitlements Via the Law of Restitution—Expectancies and Privacy’ (2005) 121 LQR 400. 2 E Weinrib, The Idea of Private Law (Cambridge, MA, Harvard University Press, 1995) 114–44. For a discussion of Weinrib’s theory in the context of restitution see L Smith, ‘Restitution: The Heart of Corrective Justice’ (2001) 79 Texas Law Review 2115. See also M Gergen, ‘What Renders Restitution Unjust?’ (2001) 79 Texas Law Review 1927, 1930. 3 Friedmann, n 1 above, 400–2.

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R E S T I T U T I O N AN D T H E L AW O F P RO P E RT Y

Under English law property rights are mainly protected through the law of torts, which recognises a number of relevant wrongs, such as trespass, detinue, conversion, and ejectment and nuisance (in the case of land), and where mere damage is caused, by the law of negligence and sometimes by rules that impose strict liability, as for example, that of Rylands v Fletcher.4 The law of restitution offers proprietary interests additional protection in instances in which the property of one person inured to the benefit of another in a manner that is not sanctioned by the law.5 In some of these situations, which came to be known as ‘waiver of tort’, the defendant acquired the benefit by his wrongful act. But restitution may sometimes be available even where the act was permissible, as, for example, in cases of necessity.6 Furthermore, the law of restitution protects proprietary interests against involuntary transfer by their owner. This right of recovery extends to situations in which the defendant was completely innocent, as, for example, in the case of transfer under mistake for which the defendant was not responsible. Another area in which restitution fulfils a major function in the protection of property rights is that of tracing. The specific rules on tracing cannot be discussed in the ambit of this essay.7 For our purposes it suffices to point out that the wide possibilities of tracing, available in Anglo-American law, greatly extend the protection granted to property rights. The effect may be twofold, namely vis-à-vis the party who originally appropriated the plaintiff’s interest and also against third parties. Thus, for example, suppose that D stole P’s car and sold it.8 If the money remains in D’s hand, tracing will grant P priority over other creditors of D with regard to this money, and if the money was used by D for a successful investment, P may be able to claim its profits. In addition, if D transferred to a third party (T) money received for P’s car, P will be able to recover from T, if T did not receive the proceeds of P’s car in good faith and for valuable consideration. Obviously, this extension of protection granted by the law of restitution to the product or proceeds of the original property leads in effect to the broadening of the ambit of the proprietary right. (1868) LR 3 HL 330 (HL). Friedmann, n 1 above. Vincent v Lake Erie 124 NW 221 (Minn. SC, 1910) discussed in Weinrib, n 2 above, 196–203, D Friedmann, ‘Restitution of Benefits Obtained Through the Appropriation of Property or the Commission of a Wrong’ (1980) 80 Columbia Law Review 504. 7 See generally L Smith, The Law of Tracing (Oxford, Oxford University Press, 1997). 8 On the question whether a fiduciary relationship between the parties is required for the purpose of tracing, see R Goff and G Jones, The Law of Restitution (London, Sweet & Maxwell, 6th edn, 2002) 104–6. 4 5 6

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T H E L AW O F R E S T I T U T I O N AN D T H E PRO P R I E TARY ASPECTS O F T HE CONTRACTUAL RIGHT

A contractual right is created by the parties in accordance with the rules relating to the formation of contracts. The law of contract which deals with contractual rights also provides the means of their protection, and every textbook on contract includes a part relating to remedies for breach. Usually this part is confined to those remedies provided by the law of contract which are directed against the party in breach. This is in line with the traditional approach, which viewed the contractual right as a right in persoman; ‘contractual rights may generally be enforced only against the other party to the contract’.9 A sharp distinction is thus drawn between contractual rights and property rights, which are rights in rem, ‘enforceable against all persons’.10 There are, however, a number of specific rules that somewhat reduce the discrepancy between the two, such as the rule relating to contracts regarding the use of chattels that may be binding upon a third party who acquired the property with knowledge of such contract.11 Of particular importance is the development of the tort of inducing breach of contract. This imposes liability on a third party for interfering with a contract to which he was not a party.12 This tort is of narrow application. It applies only if it can be shown that the defendant acted with the necessary knowledge of the contract and with an intent of procuring its breach.13 In addition, the defendant may escape liability if his action can be justified in the circumstances.14 There are also several exceptional cases in which a party in breach of a contract has been held liable in tort towards a third party who sustained a loss as a result of the breach. Liability was predicated on the tort of negligence when it was held that the contract imposed upon the contracting party a duty towards the third party. A possible example is that of White v Jones,15 in which the House of Lords held by a majority that a solicitor who was instructed to prepare a will but failed to do so within a reasonable time could be liable in negligence to the intended beneficiary of the will. This category, in which a party to the contract is held liable in negligence towards a third party, includes diverse situations, each giving rise to different issues.16 These will not be discussed in the present context. 9 J Beatson, Anson’s Law of Contract (Oxford, Oxford University Press, 28th edn, 2002) 24. 10 Ibid. 11 De Mattos v Gibson (1858) 4 De G & J 276 (CA); Lord Strathcona Steamship Co Ltd v

Dominion Coal Co [1926] AC 108 (PC); and see N Cohen-Grabelsky, ‘Interference with Contractual Relations and Equitable Doctrines’ (1982) 45 Modern Law Review 241. 12 Lumely v Gye (1853) E&B 216 (QB). 13 J Fleming, The Law of Torts (North Ryde, NSW, LBC, 9th edn, 1998) 761. 14 Ibid, 762–5. 15 [1995] 2 AC 207 (HL). 16 Eg Junior Books Co v Veitchi Co Ltd [1983] AC 520 (HL); Caparo Industries v Dickman [1990] 2 AC 605 (HL); Henderson v Merrett Syndicates [1995] 2 AC 145 (HL).

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For our purposes, it suffices to point out that it is concerned with a situation that is the very opposite of Lumley v Gye.17 White v Jones is concerned with the liability of a contracting party towards a third party, namely with the entitlement of the third party. Lumley v Gye deals with the opposite situation in which a third party is liable towards a party to the contract, namely with the entitlement of the contracting party. Since our discussion focuses on the expansion of the contractual right, it is clear that the rule of Lumley v Gye is the one relevant for this purpose. As already indicated, the tort rule originated in Lumley v Gye is of a very narrow application, since liability is conditional upon knowledge and lack of justification. The law of restitution also endows the contractual right with proprietary features, yet it does this to an extent much broader than does the law of torts. In other words, the law of restitution may impose liability on a third party even in cases in which the third party acted innocently. In order to examine the extent of the third party’s liability in restitution, let us first examine the two situations: the one in which he acted knowingly and the other in which he acted innocently. Where the third party knowingly induced the breach and benefited from it, the question arises whether the contracting party who was damaged by the breach can recover these benefits in restitution. This, in other words, is the issue of whether the tort of inducing breach of contract can be ‘waived’. The position of English law on this issue seems unclear,18 although Goff and Jones seems to support recovery in restitution.19 The first Restatement of Restitution took no position on this issue,20 although there was already an important American decision that allowed recovery on a very liberal scale in such a case.21 Since then, there has been a number of American decisions that have allowed restitution for inducing breach of contract22 and the Draft of the Restatement (3d) of the Law of Restitution and Unjust Enrichment take a similar position.23 This raises the additional question whether recovery in restitution for inducing breach of contract is dependent on the existence of the tort, namely on proof of all the elements required to establish liability in torts. Those who believe in the ‘parasitic’ theory of ‘waiver’ of tort will answer this question in the affirmative. Those, like Sir Jack Beatson and myself, who support the independence of the restitutionary claim will assume that recovery of profits is conceivable even if the tort has not been committed, (1853) E&B 216 (QB). Goff and Jones, n 8 above, 783. Ibid, 785. Restatement, Restitution, Caveat to §133. Federal Sugar Refining Co v US Sugar Equalizing Board 268 F 575 (DCNY, 1920). National Merchandizing Corp v Leyden 348 NE 2d 771 (Mass SC, 1976). However, the trend has not been uniform. See Developers Three v Nationwide Ins Co 582 NE 2d 1130 (Ohio CA, 1990). 23 Council Draft No 6 (2004) §44. See in particular illustration 5. 17 18 19 20 21 22

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for example, where the inducement to breach the contract was justified. The justification provides protection against liability to pay damages. Whether it also shields the inducer who profited from the breach from a claim to recover his profits is a different issue which needs to be examined from the viewpoint of the law of restitution. For our purposes, this question need not be examined in great detail because there are other important situations in which a third party who benefits from breach of contract is liable in restitution although he committed no wrong. This leads us to the issue of the right of recovery from the innocent third party. The decision of the House of Lords in Lipkin Gorman v Karpnale Ltd24 provides a conspicuous example. In this case, C, a partner in a law firm, had drawn money from the firm’s banking account and used it to gamble at the defendant’s casino. C committed a wrong but the defendant casino was innocent as it knew nothing about the source of C’s money. The claim was nevertheless allowed. It was held that the law firm is entitled to trace the money and recover it from the defendant. The case is regarded as the leading authority in English law on the recognition of the general principle of unjust enrichment. Ironically, some scholars argue that the decision is not based on unjust enrichment but upon the plaintiff’s property right,25 while others maintain that the cause of action was based on unjust enrichment.26 I support the view that the claim is in restitution, but for the present purposes there is no need to enlarge upon this question.27 The important point for our discussion is that the plaintiff’s right was not a property right in the traditional sense but merely a contractual right vis-à-vis the bank. This point was clearly recognised by their Lordships. Lord Goff expressly stated that the bank was the debtor and the solicitors were its creditors. The debt constitutes a chose in action and the solicitors were ‘owners of the chose in action constituted by the indebtedness of the bank to them’.28 This contractual right was wrongly interfered with, yet for obvious reasons there was no claim for inducing breach of contract. Actually the bank who owed the plaintiff the money held in their account was not in [1991] 2 AC 548 (HL). In fact this was the position taken by Lord Goff, ibid, 573–4. See also D Fox, ‘Legal Title as a Ground of Restitutionary Liability’ [2000] Restitution Law Review 465. For the property approach cf also Trustee of Jones v Jones [1997] Ch 159 (CA); Foskett v McKeown [2001] 1 AC 102 (HL); C Rotherham, ‘Tracing Misconceptions in Foskett v McKeown’ [2003] Restitution Law Review 57. 26 A Burrows, The Law of Restitution (London, Butterworths, 2nd edn, 2002) 92. 27 The issue of classification is relevant for some purposes beyond the ambit of this paper. Thus, for example, the defence of change of position should be recognised even if the claim is classified as based on property. See Rotherham, n 25 above. Similarly, in an appropriate case allowance should be made for the defendant’s contribution; cf Boardman v Phipps [1967] 2 AC 46. 28 [1991] 2 AC 548, (HL) 574. 24 25

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breach of his contract since C, the partner who abused his position, had signatory power,29 and in any event the defendant casino acted innocently. But the defendant’s innocence did not shield him from liability in restitution for appropriating the plaintiff’s contractual right, namely the right to the money in the firm’s bank account. The only issue was whether the casino gave value for the money with which C gambled. The House of Lords answered this question in the negative but allowed the casino to rely on the defence of change of position to the extent that C won back part of the money in the course of his gambling.30 This claim in restitution, which is predicated on the ground that the defendant without being authorised to do so collected or appropriated a debt that was owed to the plaintiff, faces a number of obstacles. One is concerned with the issue of privity. If the defendant was not authorised by the plaintiff (the real creditor) to collect the debt on his behalf, then the payment did not discharge the debt. Therefore, the plaintiff may have lost nothing since he can still sue his debtor. Looking at the situation from the point of view of privity, the contractual relations were between the plaintiff and his debtor. The debtor paid the wrong person possibly by mistake, or because of the latter’s fraud or some other wrong committed against him. Recovery should, therefore, follow the privity lines. The plaintiff will sue his debtor, while the debtor may try to recover his payment from the defendant.31 This point could not have been made in Lipkin Gorman since in that case the solicitor who drew the money from the bank was authorised to do so. Yet in other situations the issue may arise.32 Another possible obstacle to the restitutionary claim is that of ‘identification’. Since we are not dealing with a specific asset, it is necessary to show that the payment collected by the defendant from the debtor can be ‘identified’ as the debt owed to the plaintiff. In Lipkin Gorman, ‘identification’ was based on the fact that the money was taken from the plaintiff’s bank account. There are many other situations in which there is no difficulty in ‘identifying’ the payment to the defendant as being in reality the debt owed to the plaintiff. A possible example is the old usurpation of office cases in which the defendant receives from third parties payment due to the plaintiff by virtue of his right to the office. Such ‘appropriation’ of debts gives rise to a claim in restitution.33 These cases are generally considered to This partner was, of course, in breach of his duty to the plaintiff law firm. E McKendrick, ‘Restitution, Misdirected Funds and Change of Position’ (1992) 55 MLR 377; A Burrows, ‘Change of Position: The View from England’ (2003) 36 Loyola Law Review 803. 31 This approach was adopted in Barclays Bank v WJ Simms (Southern) Ltd [1980] QB 677 (HC). 32 See, eg Barclays Bank v WJ Simms (Southern) Ltd [1980] QB 677. 33 Arris v Stukely (1677) 2 Mod 260 (Exchequer Ct); Goff and Jones, n 8 above, 689. 29 30

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represent the waiver of tort concept. Yet, the tortious character of the usurper’s act is rather problematic and it seems that liability did not depend on the act being tortious.34 Another category of debt appropriation is that of receiving rents to which the plaintiff is entitled. If the defendant purported to be authorised to collect the debt on the plaintiff’s behalf, recovery can be premised on ratification. However, the right to restitution extends to situations in which the rent was received by one who pretends a title,35 that is, a person who claimed to be entitled to the rent in his own right and did not purport to act on the plaintiff’s behalf. In some of these cases the plaintiff has a cause of action in tort,36 in others a tort action may not be available. From the point of view of restitution, this is not decisive.37 In all these instances the plaintiff, the ‘owner’ of the right to the rent, is entitled to recovery from the defendant. It is also submitted that the fact that the original debt has not been discharged, which is often the case in the collection of rent due to another, does not preclude recovery.38 Obviously, the plaintiff cannot recover twice. If he recovers from the original debtor, his cause of action in restitution against the defendant expires.39 If, on the other hand, he recovers from the defendant, the debt must be treated as discharged and no claim can be had against the original debtor.40 I have discussed a number of specific situations in which a right of restitution for the appropriation of another’s debt is recognised. It is submitted that these situations represent a general principle under which the appropriation of another’s debt or chose in action gives rise to a right of restitution by the ‘owner’ of the original debt or any other chose in action. The claim is, of course, subject to the usual defences recognised by the law of restitution, such as bona fide purchase and change of position. In conclusion, the following can be said. A typical feature of a property right lies in its being enforceable against third parties. The availability of restitution for the appropriation of contractual rights and other choses in action greatly strengthens these rights and clearly endows them with 34 Beatson, n 9 above, 220. See also Goff and Jones, n 8 above, 689, who point out that the claim for money had and received in Arris v Stukely was held to be available ‘not because a tort had been committed but because account lay in such circumstances’. 35 Goff and Jones, n 8 above, 691. 36 Actually Goff and Jones, n 8 above, 691 state that account was not available where there has been disseisin of land, and that in such a case the plaintiff ‘should bring not an action for money had and received but an action for mesne profits, in which the measure of recovery is his loss rather than the defendant’s gain’. It is, however, submitted that a claim in restitution should also be available. 37 See the discussion of Asher v Wallis (1707) 11 Mod 146 (QB) in Beatson, n 9 above, 216. 38 But see the case of Barclays Bank v WJ Simms (Southern) Ltd [1980] QB 677. 39 In such a case the debtor will usually be entitled to recover his payment from the defendant (the purported creditor) on the ground of mistake or failure of consideration. 40 Cf also Goff and Jones, n 8 above, 690.

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proprietary characteristics. In this respect, the law of restitution goes much further than the tort of inducing breach of contract, since liability in restitution does not depend on fault and does not even require knowledge on the part of the defendant.

IV

C R E AT I O N O F E N T I T L E M E N T S — G E N E R A L C O N S I D E R AT I O N S

As already indicated, the claim for restitution has to be based on the plaintiff’s initial entitlement. The argument that the defendant has been unjustly enriched is predicated on the ground that he got something which belonged to the plaintiff or to which the plaintiff was entitled, and that he got it in a manner disapproved of by the law. The common formulation under which the defendant has been enriched ‘at the expense’ of the plaintiff reflects this fundamental requirement, namely the existence of an original entitlement that belonged to the plaintiff which lies at the source of the defendant’s enrichment. In the absence of such an entitlement, the defendant’s enrichment will not be regarded as being at the plaintiff’s expense and the plaintiff will be entitled to restitution. Let us examine the following examples: 1. X invents a new genre of storytelling, writes a book in his new genre but the book has little success. Shortly afterwards, Y writes a book in the genre invented by X. Y’s book enjoys huge success and yields large profits. 2. X conducts show business in a building on his land. Customers going to watch a show in X’s building buy on their way ice creams in Y’s shop that is located nearby. The business of X yields no profit or even runs at a loss. Y’s business yields him nice profits. In neither of these examples is X entitled to restitution. The reason has already been pointed out. X had no entitlement that inured to the benefit of Y. In example 1, the right of X is limited to a copyright in the book that he wrote. He has no right in the genre that he invented. The person who first wrote a detective story may be protected against the copying of his plot, but he has no claim against those who followed his trail and wrote stories in the same genre. The creator of a novel idea, which is unprotected by a patent or a copyright, who publicises it has no remedy against those who benefit from its use. Brandeis J stated in a dissenting opinion that the noblest of human production—knowledge, truths ascertained and ideas—become after voluntary communication to others, free as the air to common use.41 41

International News Service v Associated Press 248 US 215 (Sup Ct, 1918).

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In a sense, Y’s profits derive from X’s idea. But since he has no protected legal right in it, he can bring no action against those who benefited from its use.42 The conclusion in example 2 is similar. X has a legally protected right in his property. Had Y trespassed on X’s land and conducted his business there, X would have a right either in torts or in restitution against him.43 However, the protection granted to X’s ownership does not extend to the business done by Y outside the border of X’s property, and since Y carried on the business on his own property he is not regarded as having derived his profits from X’s legally protected interest. In this example as well, Y’s profits derive at least in part from X’s activity. But since X has no protected legal right in the benefits, sometimes termed ‘incidental’, that his activity produces, he can bring no action against those who benefited from it. In the previous sections of this essay, we examined situations in which the plaintiff’s original right derived either from the law of property or the law of contract, and, as pointed out, restitution provides additional remedies for their protection. In the present section, we are concerned with situations in which the defendant’s profits derive from the plaintiff’s act and yet there is no initial right that is recognised by any other legal branch upon which the claim in restitution can be founded. The denial of restitution in these situations can often be explained on policy grounds and on our understanding that living in society entails obligations and produces benefits. Many of these benefits are free because of our expectations regarding the advantages that follow from the existing social order and human activity in organised societies.44 Yet some situations in which the defendant’s profits derive from the plaintiff’s activity, while the plaintiff lacks a legal entitlement upon which he can base his restitutionary claim, give rise to strong feeling of unfairness and to unjust enrichment arguments in an ordinary, non-technical sense.45 These arguments may eventually have legal repercussions. In particular, the legislature can intervene and confer legal rights on those who conduct activities that produce specifically defined results.46 42 These and other examples are discussed in D Friedmann, ‘Unjust Enrichment, Pursuance of Self-interest, and the Limits of Free Riding’ (2003) 36 Loyola Law Review 839–42. 43 Restitution was denied in the well known case of Phillips v Homfray [1892] 1 Ch 465 (CA), but in view of the many decisions awarding recovery of the benefit acquired in this type of situation, it seems that Phillips v Homfray no longer represents the law: see Goff and Jones, n 8 above, 778–82. 44 Friedmann, n 42 above, and text to n 41. 45 On the distinction between unjust enrichment in the legal and the loose, non-legal, sense, see D Friedmann, ‘Valid, Void, Qualified, and Non-existing Obligations: An Alternative Perspective on the Law of Restitution’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Oxford University Press, 1991) 247, 251. 46 The legislature can of course confer rights for other reasons, yet when this is done it may have consequences in the field of restitution. A possible example is the provision in the UK Human Rights Act relating to privacy. See Friedmann, n 1 above.

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In the absence of a legislative provision, the question arises whether the courts can utilise the law of restitution to create new, legally recognised interests upon which recovery in restitution will be based. English law has been very reluctant to do so, though in some instances it was able to do so when the interest regarded as deserving recognition could be protected by an established cause of action. Possibly the most conspicuous example is that of breach of confidence. This is used to protect trade secrets, ideas and information that have not become public knowledge. When such information is disclosed in confidence, the party who receives it is not allowed to reveal it to unauthorised persons and should not otherwise use it without permission. If he does so, the ‘owner’ of that information may have a variety of remedies against him, including restitution of profits.47 The ambit of protection granted to this interest has widened considerably in view of the relative ease with which confidentiality in this context is often held to have been established. There is no need for a contract or a formal agreement. Confidentiality may be implied and arise, for example, with regard to information provided in the course of negotiations that eventually failed.48 An additional step was made when it was stated that it is illogical to insist on confidential relationship where a confidential document was ‘wafted by an electric fan into a crowded street’.49 It is thus not surprising that confidential information has been said to be property.50 The use and expansion of the equitable wrong of breach of confidence to develop protected interests has a solid basis in the area of privacy, which right was given statutory recognition in England by the Human Rights Act 1998.51 With regard to trade secrets, the protected interest has been created by the courts. While the courts of England have utilised the equitable wrong of breach of confidence to develop certain kinds of ‘quasi property’,52 courts in the United States have often employed the law of restitution to reach this result. In Matarese v Moore-McKormack Lines53 the plaintiff worked as a stevedore on the defendants’ pier. He showed his foreman models of a device, for loading and unloading cargo, that he had invented. These devices were then used on a number of piers and proved very useful. The Goff and Jones, n 8 above, 749ff. Seager v Copydex Ltd [1967] 1 WLR 923 (HC), [1969] 1 WLR 809 (CA). Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 281(HL) (per Lord Goff), quoted with approval in Campbell v MGN Ltd [2004] 2 WLR 1232, 1244–5 (HL). This statement was made in the context of privacy, and Lord Goff suggested that in the commercial context a transaction or relationship between the parties is still required: Guardian Newspapers, 281. It is doubtful whether this distinction is justified. 50 Goff and Jones, n 8 above, 754–5. 51 Sch 1, Art 8. 52 On the English law regarding trade secrets and confidential information, see Goff and Jones, n 8 above, 749ff. 53 158 F 2d 631 (2nd Cir, 1946). For a discussion of the American case law on the subject, see G Palmer, The Law of Restitution, vol 1 (Boston, MA, Little, Brown, 1978) 106–20. 47 48 49

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plaintiff and his witness testified that the foreman promised the plaintiff one-third of what the defendants would save by the use of the device. But the defendants argued that the foreman had no power to bind them and the case was decided on the ground of unjust enrichment. It was held that the doctrine of unjust enrichment is applicable to a situation where, as here, the product of an inventor’s brain is knowingly received and used by another to his own great benefit without compensating the inventor

and the defendants were thus held liable. It may be noted that there is a circular element in this reasoning. The defendants’ enrichment is unjust if they used something that legally belonged to the plaintiff. If the plaintiff had no legally protected right in his device, the defendants were free to use it and their enrichment would not be unjust, at least not in the eyes of the law. As we have seen in example 1 above, this is the position with regard to the invention of a new genre of storytelling that became public knowledge with the publication of the inventor’s book. Other people may use this invention and their enrichment is not unjust in the legal sense, because the inventor has no legally protected right in this invention. Hence cases like Matarese, when imposing liability on the ground of unjust enrichment, are predicated on the ground that the plaintiff has a legal right in that which was used by the defendant. This right was created by the first decision that imposed such liability. It was borne simultaneously with the cause of action in restitution and lies at its basis. The interest in intangibles has proved to be the most fertile area in which the law of restitution has been utilised to create new protected interests. It is easy to understand why this has happened. In modern times, intangibles such as intellectual property, goodwill and the interests in privacy and publicity have become of exceptionally high value. There is a strong feeling of unfairness when one person is enriched by imitating or copying another’s ideas or takes advantage of another’s reputation. The enrichment acquired in this way is naturally seen as unjust, at least in the non-legal sense,54 and this feeling is occasionally transformed into legal rules. However, the creation of such an entitlement via the law of restitution must be subjected to a number of basic considerations. These include the interrelationship between possible liability in restitution and the legislation relating to intellectual property, the interest in free competition, the interest in the free use of information and the necessary limits upon judicial legislation. In the following section we shall examine a number of leading decisions in which these issues arose. 54

See n 45 above.

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V

A

C R E AT I O N O F E N T I T L E M E N T S — S P E C I F I C E X A M P L E S

Interest in Fresh News

We have already noticed the use of the concept of unjust enrichment in the protection of trade secrets and ideas that are disclosed in confidence.55 However, the rules regarding confidential information do not apply where the ‘owner’ makes a public disclosure of the information or the idea that he possesses. From the ‘owner’s’ point of view the greatest difficulty arises where the very use of an idea or information necessarily leads to its disclosure. The originator may be deprived, in the absence of a statutory right, of any protections against imitators and others who exploit his ideas or the information he gathered. In this type of situation the above-quoted statement by Brandeis J under which ideas and information ‘become after voluntary communication to others, free as the air to common use’56 is generally applicable. Nevertheless, objections to what is felt to be an unjust enrichment occasionally led to the creation of exceptions to this rule. The leading American case of International News Service v Associated Press57 provides a conspicuous example. In that case, the parties were competitors in the gathering and distribution of news for publication in newspapers. The defendant, International News Service (INS) sought to obtain information gathered by the claimant, the Associated Press (AP). One of the methods employed by INS to this end was to take AP stories which appeared on AP bulletin boards and in the early eastern editions of newspapers published by AP members and distribute the information, without acknowledging its source, to INS member newspapers. This practice was probably precipitated by the fact that Hearst Newspapers, which controlled INS, had taken positions sympathetic to the Germans in the First World War. The British and French authorities reacted by impeding the flow of information to INS.58 An injunction was issued, although it was generally conceded that AP, the claimant, had no copyright in the information it had gathered. The case is often regarded as an example of unfair competition, a point expressly made in the opinion of Pitney J, who spoke for the majority. There is, however, no doubt that the underlying reasoning is based on unjust enrichment, namely the fact that the defendant See above, p 194. Text to n 41 above. 248 US 215 (1918). See R Epstein, ‘International News Service v Associated Press: Custom and Law as Sources of Property Rights in News’ (1992) 78 Virginia Law Review 85, 90–2. 55 56 57 58

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is endeavouring to reap where it was not sown and . . . is appropriating to itself the harvest of those who have sown. Stripped of all disguises, the process amounts to an unauthorized interference with the . . . claimant’s legitimate business . . . in order to divert a material portion of the profit from those who have earned it to those who have not . . .59

It was, of course, clear that a purchaser of a newspaper is entitled to spread knowledge of its contents. However, it does not follow that a competitor can do so for profit. It has been considered that the ‘promise suggested by the broad language of International News Service has not been realized’ and that the ‘scope of the doctrine has on the whole been narrowly limited’.60 However, in recent years there seems to be growing interest in this case,61 which has been applied in a number of other contexts.62 It should also be noted that the circular element in reasoning, which was pointed out in the context of discussing Matarese, is similarly present in International News Service. The defendants’ enrichment is unjust if they used something that legally belonged to the plaintiff. Otherwise it is not unjust, at least not in the legal sense. Indeed, it is clear that the decision is predicated on the ground that the plaintiffs had a kind of a limited proprietary interest in the information that they gathered, and that the notion of unjust enrichment provided the basis for its recognition. The plaintiffs’ interest is, of course, very limited, extending only to its commercial use in the brief period during which the information is ‘hot’ or fresh. Yet this interest, although limited, is of considerable economic value.

B Goodwill The commercial aspects of reputation, usually described as goodwill, are guarded through the torts of passing off and injurious falsehood. Restitution will in all probability be granted in cases of benefits derived from passing off63 and perhaps also in cases of injurious falsehood.64 Goodwill is thus a legally protected interest. The question that concerns us is whether the law of unjust enrichment should be utilised to expand the protection granted to this interest so that restitution will be available where an Ibid, 239. Palmer, n 53 above, 113. See, eg Epstein, n 58 above; D Baird, ‘Common Law Intellectual Property and the Legacy of International News Services v The Associated Press’ (1983) 50 Chicago Law Review 411; W Gordon, ‘On Owning Information: Intellectual Property and the Restitutionary Impulse’ (1992) 78 Virginia Law Review 149 (1992). 62 Restatement (3d) Unfair Competition (1995) §38 at 411–13. 63 Goff and Jones, n 8 above, 783. 64 The latter category is somewhat problematic because this tort is close to defamation and the two often overlap. Hence, if restitution is denied in cases of defamation, it is not clear whether it will be allowed in cases of injurious falsehood. Yet Goff and Jones, n 8 above, 720, assume that restitution of gains derived through injurious falsehood will be allowed. 59 60 61

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unauthorised person derives benefits by appropriating another’s goodwill in a way that does not constitute a tort. The courts in England, though they applied the law of restitution to expand the protection granted to recognised legal rights,65 were unwilling to do so in the context of goodwill. This approach is reflected in the decision of the Court of Appeal in Harrods Ltd v Harrodian School Ltd,66 in which the plaintiffs were the proprietors of the famous Harrods store in Knightsbridge. They brought an action to enjoin the defendants from running a school under the name ‘Harrodian School’. The term ‘Harrodian’ had been used by the staff of Harrods and there was a staff club known as ‘The Harrodian Club’, which had occupied a site in Barnes since 1904. The club closed in 1990 and it was decided to sell the site. The principal director and shareholder of the defendants was Sir A, who was also a proprietor and chairman of Merlin School. In 1990 Merlin School negotiated the purchase from the plaintiffs of the site. In the course of the negotiations, Sir A’s solicitors stated that it was his intention to use the premises to expand Merlin School. This statement was never corrected, ‘but the judge found that its effect was spent when the negotiations broke down’.67 Negotiations were resumed in 1992 and the site was acquired in 1993. The judge found that Sir A acted in good faith and that he did not believe that it was material to the plaintiffs that he was going to use the name ‘Harrodian School’. Sir A also explained that he intended to exploit the name of the site, which was a landmark site, and not to trade off any reputation belonging to Harrods. His explanation was accepted by the judge and the claim was dismissed on the ground that there was no likelihood of confusion. The decision was affirmed by majority (Millet LJ and Beldam LJ, Sir Michael Kerr dissenting). Millet LJ pointed out that the property which is protected by an action for passing off is not the plaintiff’s proprietary right in the name or get up which the defendant has misappropriated but the goodwill and reputation of his business which is likely to be harmed by the defendant’s misrepresentation.68

He further held that there was no evidence of confusion, no common field of activity, and even if there is scope for some limited confusion to linger in the public mind, the plaintiffs have not discharged the heavy burden of establishing a real likelihood of more than minimal damage to the plaintiff’s goodwill.69 65 See the discussion of the expanded protection granted to contractual rights and the case of Lipkin Gorman, above text and following to n 24. 66 [1996] RPC 697 (CA). 67 See the decision of Millet LJ at 705. 68 Ibid, 711. 69 Ibid, 718.

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Sir Michael Kerr in his dissent stated that the likelihood of confusion was self-evident and that Sir A’s ‘reason . . . for choosing the name Harrodian was its connection with the site which he had bought . . .’.70 The choice of name therefore carried with it, inevitably, the cachet of an apparent connection with the reputation of Harrods . . . In deciding to give the school this name, he appropriated a part of the goodwill of Harrods for the school.71

His Lordship also concluded that the plaintiffs suffered a detriment, so that an injunction for passing off should have been granted. For our purposes there is no need to examine the issue of passing off. The question relevant to our discussion is whether a remedy in restitution for the appropriation of another’s goodwill ought to be available irrespective of whether this appropriation constitutes a tort. The point was not raised in Harrods Ltd v Harrodian School Ltd, and it seems to have been assumed that in the absence of a tort there is no remedy. It is, however, submitted that the issue of unjust enrichment should be independently examined, with the result that the absence of a certain element required for liability in tort is not necessarily fatal for the purpose of restitution. The tort of passing off requires proof of damage and also misrepresentation that leads or is likely to lead the public to believe that goods or services offered by the defendant are those of the plaintiff. However, I would argue that for the purpose of a claim based on unjust enrichment these elements are not crucial. It suffices that the defendant, in order to make a gain, appropriated distinctive features of the defendant’s trade name. Such gain may be derived even where the likelihood of confusion is meager or non-existent. The consumer may be aware that the defendant’s goods or services are not those of the plaintiff, yet he may be attracted to the name which, by virtue of the plaintiff’s ability and creativity, had acquired prestige and repute. The case of Harrods Ltd v Harrodian School Ltd can be contrasted with the decision of an Israeli district court in The Boeing Co v Boeing Travel and Tourist,72 in which a travel agency adopted the name of the well-known American aircraft manufacturer. The American company sought an injunction to prevent the use of its name. It was held that there was no passing off because, inter alia, the travel agency did not sell a product similar to that of the American corporation. It was also unlikely that the public would be misled into assuming that the travel agency was connected with the American corporation. Nevertheless, an injunction, based on the law of unjust enrichment, was granted on the ground that the Israeli company was trying to benefit from the prestige built up by the American corporation and associated with its name. It is submitted that 70 71 72

Ibid, 721–2. Ibid, 722. [1989] (3) PM 108.

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the court reached a correct result. The appropriation for the sake of gain of another’s name or reputation should give rise to a cause of action in restitution even if the act does not constitute a tort of passing off (or any other tort). In addition, the fact that an Israeli travel agency was prevented from using the name of Boeing does not unduly impair its operation, nor does it impede free competition.

C

The Right of Publicity and the Right of Performance

The objection to unjust enrichment provided the major impetus for the recognition of the right of publicity in American law. In Zacchini v Scripps-Howard Broadcasting Co,73 the plaintiff performed at a county fair as a ‘human cannonball’. The performance was filmed and shown in the defendant’s television news programme without the plaintiff’s consent. The US Supreme Court held that that the defendant’s reproduction of the entire performance went beyond the protection granted to freedom of the press by the First Amendment of the Constitution. The defendant was thus held liable on the ground of unjust enrichment and the Court stated that the rationale for protecting the right of publicity ‘is the straightforward one of preventing unjust enrichment by the theft of goodwill’.74 As already pointed out, in the context of trade secrets this reasoning is circular. The appropriation of another’s name, picture or reputation for commercial purposes is a ‘theft’ that leads to unjust enrichment only if it is assumed that these interests are capable of being owned and are actually owned by the plaintiff. This, of course, begs the very question whether they are so owned. Yet, as can be seen, the notion of unjust enrichment led in Zacchini to a positive answer to this question. It may also be noted that Zacchini involved primarily the right to performance, namely the issue whether a person has an exclusive right to a performance or a spectacle that he stages. Where the performance is staged in a closed hall, the organiser can usually maintain his rights by only allowing entry subject to a prohibition against filming, taking photographs or recording. The difficulty arises where the performance is in an open stadium that can be watched from above, or in an area open to the public. 433 US 569, 575–6 (1977). This statement was actually quoted from H Kalven, ‘Privacy in Tort Law—Were Warren and Brandeis Wrong?’ (1966) 31 Law and Contemporary Problems 326, 331. For similar reasoning with regard to artistic performance see Capitol Records Inc v Mercury Records 221 F 2d 657 (2nd Cir, 1955) and Restatement (3d) Unfair Competition, Reporters’ Notes to §38 at 417–19. On the right of publicity in American law, see Restatement (3d) Unfair Competition (1995) §§46–9. It should, however, be noted that even if the notion of unjust enrichment provided the historical reason for recognising the right to publicity, once this interest is treated as a type of property, damages in torts for its infringement may well be allowed: see Restatement (2d) Torts §§ 652C–H. 73 74

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Again the basic issue is whether the person who stages the performance acquires a legal entitlement in the show. Notions of unjust enrichment occasionally do lead to the conclusion that such a right has been acquired and that its filming or broadcasting by an unauthorised person constitutes an unjust enrichment.75 Israeli case law has also adopted the approach under which the law of restitution itself can create the legal entitlement upon which the unjust enrichment claim is based. Thus, in the recent case of Aloniel Ltd v McDonald,76 the question arose whether a claim in restitution can be brought for the unauthorised use of a celebrity in an advertisement. Section 2(6) of the Israeli Privacy Law 1981 provides that the use of a name, likeness, photograph or voice of a person for the purpose of profit constitutes breach of privacy. The court considered, however, that the purpose of the Privacy Law and that of section 2(6) is the protection of privacy, namely the right of the person to be left alone and not to be disturbed or troubled by disclosure to the public of private information. Hence, section 2(6) does not protect the right of publicity, namely the economic interest of a person to exclusive exploitation of his fame and reputation. It would, however, apply in the case in which the name of a celebrity is used for purposes with which he disagrees or in a way that injures his reputation, as happened, for example, in Onassis v Christian Dior—NY Inc.77 Yet the court in Aloniel concluded that the right of publicity ought to be recognised in Israel subject to some limitations deriving from freedom of expression. The protection to be granted to the economic interest of a person in his name and reputation is rooted in the law of restitution. The unauthorised use of a person’s name and reputation for commercial purposes constitutes unjust enrichment. For this purpose there is no need to decide if the right of publicity is a property right. It suffices to base liability on the fact that such use of another’s reputation is unfair and improper. The resulting enrichment is therefore unjust. The circular element in this reasoning has already been pointed out. 75 Cf Victoria Park Racing v Taylor (1937) 58 CLR 479, in which the High Court of Australia held that the owner of a horse racing stadium had no cause of action against a person who built a platform on his own land and was thus able to watch and broadcast the races. The claim against the broadcasting company was also dismissed, even though the broadcast led to a decrease in the attendance at the racecourse. A different approach can be discerned in American law: see Pittsburgh Athletic Club v KQV Broadcasting 24 F Supp 490 (DC, WD Penn, 1938), in which it was held that the owner of a baseball team had a right of property in the news value of games played by his team in the field in which the games were held. The limit of this approach is reflected in WCVB-TV v Boston Athletic Ass 926 F 2d 42 (1st Cir, 1991), in which an application by the organisers of the Boston marathon to enjoin an unauthorised broadcast of the event was denied. See also comment to §38 of the Restatement (3d) on Unfair Competition and W Prosser and P Keeton, On Torts (St Paul, MN, West Publishing, 5th edn, 1985) 1020–1. 76 (2004) 58(4) PD 314 (CA 8432/04). The facts of the case are described in [2006] Restitution Law Review 176. 77 472 NYS 2d 254 (NYSC, 1984).

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Needless to say, this is not the only possible approach to the right of publicity. This right is now recognised in English law in the wake of the Human Rights Act 1998. This Act led the courts in England to extend the equitable action for breach of confidence to protect the right of privacy and the right of publicity.78 These rights were established by statute and their recognition seems to be based on grounds other than the objection to unjust enrichment.79

D

The Interest in Design and Product Imitation

The general approach adopted in a number of legal systems is that the owner or designer of a product that is unprotected by legislation relating to patents, designs or trademarks, or by any other specific legislation, has no cause of action against those who imitate this product,80 provided, of course, that the imitation does not mislead consumers into thinking that the product is that of the plaintiff, in which case a cause of action for passing off as well as a cause of action in restitution for the appropriation of goodwill may be available. This approach enabling product imitation comes under pressure deriving from objections to unfair competition and sometimes also from the concept of unjust enrichment. In Israel, the issue arose in A.Sh.I.R. Import, Production & Distribution v Forum Avisarim and Consumption Products Ltd,81 which was concerned with three cases in which District Courts in Israel granted an injunction enjoining the imitation of industrial products. In none of these cases could the plaintiff base his claim upon the legislation dealing with intellectual property, nor did the defendant in any of these cases commit the wrong of passing off. One of these cases was concerned with the imitation of bathroom accessories, the second with the imitation of photograph albums and the third with the imitation of a block relief system used for the production of aluminium frames. The Supreme Court decided to allow appeals in the bathroom accessories and photograph albums cases, and held that there was no room for an injunction in these cases. It did, however, decide by a 4–3 majority to dismiss the appeal relating to the injunction against the imitation of the block relief system. The majority considered that the legislation dealing with intellectual property did not exclude the application of the law of unjust enrichment in areas that were not within its ambit, so Douglas v Hello! [2005] EWCA Civ 595 and Friedmann, n 1 above, 414–19. Yet, once these rights are recognised, restitution of profits deriving from their breach will be available: Friedmann, n 1 above, 414–19. 80 Fleming, n 13 above, 788: ‘unless . . . a product . . . is protected by the patent, trademark or registered design laws, mere imitation or copying is permitted’. 81 (1998) 52(4) PD 289. A somewhat more detailed summery of this case appears in [2000] Restitution Law Review 412. 78 79

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that it was conceivable that the law of unjust enrichment would protect ideas that were not protected by this legislation. However, three of the majority justices considered that a remedy based on unjust enrichment ought not to be available to a party who could have protected his idea by way of registration (under the relevant stature) but had negligently failed to do so. Four justices have thus concluded that there may be circumstances which would justify the application of the unjust enrichment principle to protect ideas, although they are not within the ambit of the intellectual property legislation. However, the exact nature of these circumstances remains rather vague. The main guidelines seem to be that: (i) the idea must be novel, concrete and capable of practical application; and (ii) the defendant must be aware that he is copying another’s idea. To this it should be added that President A Barak, who was among the majority, emphasised the approach under which copying a competitor’s idea might constitute unfair competition. According to this view, the plaintiff’s right is not founded upon a monopoly in his idea, but upon the improper conduct of his competitor. Therefore, the availability of the remedy and its extent depend not only upon the nature of the idea, but also upon the conduct of the defendant as well as the other circumstances of the case. Nevertheless, it is clear that the use of the idea of unjust enrichment led to the creation of a new entitlement in the design and possibly also in the function of a new product that is unprotected by the legislation dealing with intellectual property. The decision is highly problematic. It is clear that not every new product that comes to the market enjoys protection against imitation. The guidelines on this point are extremely vague. In addition to the very question relating to the nature of the plaintiff’s idea and the type of conduct of the defendant that justifies judicial intervention, there arises the question of the length of time for which the protection against imitation will be extended. These matters are unlikely to be satisfactorily resolved by judicial decision and should be left to legislation.

VI

CONCLUSION

The right to restitution of benefits gained by the unauthorised use of another’s entitlement has served to expand the ambit of existing legal rights in contract and in torts. In addition, the use of the concept of unjust enrichment has led courts, notably those in the United States and in Israel, to recognise new entitlements, such as the interest in publicity, as worthy of legal protection via the law of restitution. This kind of judicial legislation can be accepted and can serve a useful purpose if its boundaries can be drawn by judicial decision with reasonable precision and if it does not

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conflict with other social values. However, such judicial legislation becomes highly problematic in instances like that of product imitation, in which a creation of a new entitlement is likely to lead to great uncertainty and unduly to affect other important interests such as that of free competition.

11 The Shock of the Old: Interpretivism in Obligations THE S HOCK OF THE OLD

S T E V E HE D L E Y * S TEVE HEDLEY

A

NEW PHILOSOPHY is now being urged on those engaged in the study of the law of obligations. This ‘interpretive’ approach is said to represent a significant step forward in understanding, and to save the area from numerous errors—and, indeed, from the risk of intellectual collapse. While this approach is in one sense new, its proponents are clear that they are simply stating openly what a significant body of scholarship has long assumed to be the case. This essay considers the new interpretivism, and works towards an assessment of its products.1 The timing of this ‘new’ movement is important. The central areas of private law scholarship, if not exactly in crisis, nonetheless seem rather lacklustre today when compared with other legal research. The rise of public law has deprived them of the dominant status they had for most of the twentieth century. And it is no longer obvious—if it ever was—that the more specialised areas of private law pay much attention to the supposedly ‘central’ areas. So, for example, debate on the law of the sale of goods or of intellectual property is rather remote from debate on general contract law, and the proposition that the former is partly based on the latter seems increasingly doubtful. And some openly doubt whether the traditional conceptions of the core areas—contract as promise, tort as personal wrong—make much sense as constituents of the legal system in the early twenty-first century. Part of the impetus behind the new interpretivism is to shore up these traditional conceptions, and therefore (perhaps) to Professor of Law, University College Cork. Written from an explicitly interpretivist standpoint are: S Smith, Contract Theory (Oxford, Clarendon Press, 2004) and A Beever and C Rickett, ‘Interpretive Legal Theory and the Academic Lawyer’ (2005) 68 MLR 320. Other relevant writings by the same authors include: A Beever, ‘The Structure of Aggravated and Exemplary Damages’ (2003) 23 Oxford Journal of Legal Studies 87; A Beever, ‘The Law’s Function and the Judicial Function’ (2003) 20 New Zealand Universities Law Review 299; S Smith, ‘A Map of the Common Law?’ (2004) 40 Canadian Business Law Journal 364. *

1

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salvage some of the prestige that central private law theory had in early years.

I

I N T E R P R E T I V I S M : W H AT I S I T ?

‘Interpretive legal theory is nothing more (or less) than the attempt to understand legal concepts in terms of their meaning.’2 In other words, it is an attempt to reveal an intelligible order or meaning in the law. By considering which theories might explain key features of the law in a particular area, the method seeks out the best explanation of that law, and thus to explain the significance and interrelation of key concepts within it. So, for example, an interpretive theorist investigating the law of negligent misrepresentation will ask which theory best explains it. Is it best explained, say, by the theory of reliance (that the defendant will be liable for losses caused by foreseeable reliance on the misrepresentation), or by the theory of consent (that the defendant will be liable for reliance losses where the defendant consented to that reliance)3? Asking such questions is said to be the core concern of interpretive theory. The overall aim is therefore to go from a large and possibly confusing mass of legal information to a relatively tight and coherent theory which is thought to lie behind it or justify it. There is often considerable scope for argument over which theory is the best one. Interpretivists are deliberately vague on many aspects of what is thought to be the ‘best’ theory: they insist that the search for such theories is what legal theorists ought to engage in, but acknowledge that there are many different conceptions of the ‘best’. There appears to be room for disagreement over precisely what is involved here. Smith proposes four matters to be considered in determining this: fit (consistency with the legal materials to be explained), coherence (non-self-contradiction), morality (the moral appeal of the theory) and transparency (consistency with the actual words used by the legal actors involved)4. Beever and Rickett prefer to talk more loosely about ‘reflection’,5 and they pass over Smith’s four criteria largely without comment.6 But the general idea is clear. Interpretivists are keen to argue that their theory is a broad church, and in giving examples of some controversies where they think the method is useful, they insist that many different theories are consistent with the method. And while the method obviously draws on Ronald Dworkin’s 2 3 4 5 6

Beever and Rickett, ibid, 328. This example is explained in detail in Beever and Rickett, ibid, 322–4. Smith, Contract Theory, above n 1, 7–32. Beever and Rickett, above n 1, 324. For commentary see Beever and Rickett, above n 1, 325 note 21.

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view of ‘law as integrity’,7 they argue that any natural lawyer or positivist ought to be happy with it.8 As to which accounts of particular aspects of law are compatible with it, Beever and Rickett say that all ‘who attempt a conceptual understanding of the law’ can be said to be interpretivists, and they explicitly include Birksian taxonomists, corrective justice theorists and ‘at least some’ law-and-economics scholars.9 A more interesting question is whether anyone making any kind of a study of law is excluded from this description. Most studies of law can be said to be looking for patterns—as the interpretivists themselves say, this is a general intellectual method by no means confined to law. No doubt there could be some individual legal case studies—by sociologists, journalists or legal historians—that are not meant to identify general patterns at all, and these would presumably be outside the method’s scope. (Though even there, general patterns in the law are likely to be relevant to the enquiry.) Most other attempts to understand the legal systems of the world would seem, in principle, to be included. Looking for patterns is what academics do. So there appears to be a dilemma here: either the method is a mere statement of the obvious, or it is in fact less universal than it appears. The latter seems to be the intention. But which legal scholars are regarded as anti-interpretive? There are numerous hints that the interpretivists do not regard themselves as using the same method as legal realists. But why would this be? After all, legal realists are also looking for patterns in how the legal system behaves, and welcome self-consistent accounts of the legal system’s doings. And it is not clear how interpretivists can object in principle to accounts of legal processes which pay relatively little attention to what legal actors say they are doing, as they themselves feel free to reject particular judicial statements when they consider that this will enhance legal understanding.10 It is far from clear whether the interpretivists’ rejection of legal realism is a mere preference on their part or has some solid intellectual basis. Smith is certainly working toward the latter, insisting that his requirement of ‘transparency’ excludes most realist descriptions; but he has relatively little to say on why this criterion is a 7 On which see especially Ronald Dworkin, Law’s Empire (London, Fontana, 1986) ch 7. However, it seems to me (though this is not the place to consider it in detail) that there is a rather large difference between attempting to resolve hard cases (which is Dworkin’s principal concern) and attempting to structure legal theories (which is the usual interpretivist project). Interpretivists are anxious not to be read as endorsing every aspect of Dworkin’s theory: Smith, Contract Theory, above n 1, 5 note 5; Beever and Rickett, above n 1, 322 note 145. 8 ‘Our view is compatible with legal positivism (inclusive or exclusive), integrity theory, and natural law theory’: Beever and Rickett, above n 1, 322 note 14. 9 Ibid, 320 note 2. 10 See, eg Beever and Rickett, above n 1, 324: ‘The interpretive legal theorist does not try to interpret the judges’ actual intentions, but to determine what their intentions should have been’; see also their comment on judges who refer to public policy: 328.

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valuable one.11 A methodological rule that judges must usually be assumed to mean exactly what they say seems rather dogmatic; the classic realist arguments for looking at what they do as well still seem to have weight. This aspect of the theory is so far poorly defended. There must be a suspicion (based on the interpretivists’ insistence on law as a discipline) that they are working towards a revival of the ‘insider’/‘outsider’ distinction, arguing that the law’s order can only be seen by those who, up to a point, share its values. So the patterns they seek can only be seen by ‘insiders’ who subscribe to the values of the legal system, whereas ‘outsiders’ will only see it as a meaningless, patternless blur.12 If so, it seems a retrograde step, as it confuses knowledge with values. Understanding how the legal system works is very different from, and may or may not go along with, sympathy with its values. Many with an excellent understanding of the legal system withhold adherence to its values, either through fundamental disagreement with them or because a commitment of that sort seems incompatible with rational enquiry. To imply that such people are not really looking for coherence in the law is inaccurate (as well as libellous).13

II

AN AMBIGUITY

While the descriptions of the interpretivist method itself are clear enough, crucial questions about its status arise. Interpretive methods do not look so very strange: indeed, we might be inclined to criticise the ‘new’ theory not for unwarranted novelty but, on the contrary, for simply dressing up what legal academics have been doing all along in a (quite unnecessary) theoretical package. Yet there is a crucial ambiguity here, as can be seen by contrasting the approach of Smith with that of Beever and Rickett. For Smith, while the method is valuable, it is simply one method and no more; and he expressly contrasts the interpretive method with other, no less valid, legal methods14. For Beever and Rickett, the interpretive method is more than that: it is the distinctively legal method. So Smith is simply describing a valuable tool which all who think about law can use, and some will want to use exclusively. Beever and Rickett doubt whether those not using the method belong in the law school at all, at least unless outnumbered by interpretivists: a failure to use the interpretive method ‘is nothing less than a surrender of the notion that law is an academic discipline’.15 11 12 13 14 15

See generally Smith, Contract Theory, above n 1, 24–32. For hints of this see ibid, 17 note 23. See especially H Collins, Regulating Contracts (Oxford, Oxford University Press, 1999) 9. See Smith, Contract Theory, above n 1, 4–5. Beever and Rickett, above n 1, 336.

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While Smith’s view seems at first glance to be the more reasonable, in fact it turns out to be quite difficult to define the position or distinctiveness of interpretivism in relation to other methods. Looked at closely, it is very hard to distinguish the method from other intellectual approaches to law, and so the argument that the method is distinct does not convince. Smith argues that four types of method are available for understanding what the legal system does: (1) historical methods; (2) descriptive methods; (3) prescriptive methods; and (4) interpretive methods.16 But this sequence looks odd. Historical analyses are usually understood to be about the law’s past; descriptive analyses are about its present; and prescriptive analyses are about how it should develop, and are thus about its future. It is not entirely clear how this sequence can be continued. And in fact the arguments used by interpretive theorists seem to be drawn from a variety of historical, descriptive and prescriptive sources. Rickett and Beever suggest that the method should be seen as a ‘hybrid’ of other types of method,17 and this is true so far as it goes. What is also clear, however, is that certain commonly used methods are rejected: for example, appeals to public policy in legal reasoning ‘must always be problematic’ and are not regarded as capable of forming part of any sensible interpretivist account.18 So we appear to have an unresolved dilemma: it is not clear at all how the method can really be distinct from legal methods generally, but it is clear that it will not do as a general description of how the law works, as it rejects important aspects of the legal system as misconceived. In fact, it is no great criticism of interpretivism to say that it makes a mixture of historical, descriptive and prescriptive claims—the same could be said of most approaches to the law. And the same argument can often be stated in either descriptive or prescriptive terms, as the arguer wishes. The real danger is that, by building up interpretivism as a supposed approach or methodology, its proponents create a massive distraction for their colleagues. Some will be ‘for’ interpretivism, others ‘against’. Yet in fact the interpretivists make a variety of claims, some of which are more reasonable than others, and some of which are more novel than others. Treating it as a coherent intellectual movement does everyone a disservice, because it directs attention away from the particular claims it makes in particular situations and inhibits rational discussion of those claims. There is a real danger that interpretivism’s claim to be looking for coherent patterns in the law will be treated as something remarkable, and somehow in opposition to the endeavours of other jurists, rather than a statement of the obvious about all intellectual activity. Yet most of what separates interpretivists from other legal theorists lies in the realm of mere preference, such as a reluctance to base oneself too firmly on views of 16 17 18

Smith, Contract Theory, above n 1, 4–5. Beever and Rickett, above n 1, 322 note 14. Ibid, 335.

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what the purpose of a particular law is, or of what policy the law should be pursuing in that area. Different preferences about what questions to ask are healthy enough; but what is needed is to subject supposed answers to close and careful scrutiny. Anything that gets in the way of that process, by diverting real differences about the law into discussions of methodology, is a distraction. It needs to be borne in mind, therefore, that there are two very different approaches to interpretivism’s status: the methodological approach (exemplified by Smith), which proposes that interpretivism should be recognised as a legitimate method in legal studies, and the imperialistic approach (exemplified by Beever and Rickett), which would deny legitimacy to non-interpretive approaches. Obviously the two approaches have much in common; indeed, they appear to be proposing the same method though they differ as to its utility. I will, however, return to the distinction below in evaluating the interpretive approach to date.

III

T H E ME T H O D AN D L E G A L H I S TO RY

Is the interpretivist method incompatible with legal history? There is no immediate reason to think so. Nonetheless, there are points of tension between the two. One of the first lessons that trainee historians (legal or other) learn is that they should not view the past through the eyes of the present. The past is a foreign country, with different values, and set in very different circumstances. To evaluate historical cases by modern standards is very probably to misconceive them. And so it has often been said that legal history is subversive: it reminds lawyers of inconvenient facts about the origins of their laws, and disrupts cosy consensuses about what law is ‘for’, by reminding us that the past circumstances out of which it arose were as confused and conflict-laden as the present. It is elementary that history is the study of both continuity and change. Since interpretivists tend to emphasise continuity, it will often fall to the legal historians to remind them about change. It is therefore easy to see how a historical account, searching for the attitudes which led to particular legal developments, can clash with an interpretivist account, which attempts to see coherent values (our values, not last century’s values) in those materials. It is also clear that this conflict will be all the worse if the interpretivists are not sensitive to these concerns. This seems to be behind the recent (extraordinarily fierce) interpretivist attack on Stephen Waddams’s Dimensions of Private Law.19 To Rickett 19 S Waddams, Dimensions of Private Law: Categories and Concepts in Anglo-American Legal Reasoning (Cambridge, Cambridge University Press, 2003). See also S Waddams, ‘Classification of Private Law in Relation to Historical Evidence’ (2003) 6 Current Legal Issues 265.

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and Beever, Dimensions is ‘a sustained critique’ of interpretivist theory, making a number of claims against it, most of which misunderstand their target. All of them fail: In the end, Dimensions of Private Law fails to achieve its task because it refuses to understand interpretive legal theory in its own light.20

So Dimensions is thought valuable for giving the interpretive theorists the opportunity to restate their theory, but in other respects is pernicious. All of this must come as something of a surprise to those who have actually read the book. If Dimensions is an attack of any sort on interpretive theory, this has escaped others who have reviewed it.21 It also seems to have escaped its author, who does not mention interpretive theory, under that name or otherwise. On the evidence of the book alone, it appears that Waddams has either never heard of interpretive theory or did not regard it as worthy of special mention when he wrote Dimensions. His concern is to decry the misuse of legal history to support doctrinal theories (any doctrinal theories). In fact, Waddams is noticeably reluctant to criticise particular theories as such. Some of us might have been very pleased if, for example, he had attacked Birks’s general claims as to a broad taxonomy said to underlie the law. Consistently with the theme he set himself, he did no such thing, confining himself to criticism of Birks’s historical claims.22 He now finds himself criticised for views he was very careful not to affirm, and finds his actual views distorted or ignored. Smith is more measured here than Beever and Rickett, complaining only of Waddams’s treatment of Birks’s views rather than any supposed assault on interpretivist theory. It may be questioned, however, whether the result is fair either to Waddams or to Birks. Birks was engaged in a strictly descriptive exercise, or so he said. He assumed that no theory was needed to see plain facts, and he thought he was describing plain facts; the clarity of his written style was the greater as a result. When he spoke of maps or of analogies with the natural world, it does not appear that any abstruse theoretical reference was intended;23 and a subsequent Festschrift for Birks was happily entitled Mapping the Law, again without (apparently) committing its diverse contributors to any particular theoretical position.24 Smith’s judgment of Birks is, implicitly, a deeply negative one: that the Beever and Rickett, above n 1, 335. See reviews by D Capper (2003) 54 Northern Ireland Legal Quarterly 450; G McMeel (2004) 24 Legal Studies 647; G Samuel ‘Can the Common Law be Mapped?’ (2005) 55 University of Toronto Law Journal 271. In this and other respects, it is very hard to recognise Dimensions in the comments made against it by the interpretivists; and many views ascribed to Waddams are either inaccurately footnoted or not footnoted at all. 22 Eg Waddams, Dimensions, above n 19, 110. 23 For Birks on maps see especially Unjust Enrichment (2nd edn, Oxford, Clarendon Press, 2005), ch 2. 24 A Burrows and Lord Rodger of Earlsferry (eds), Mapping the Law—Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006). 20 21

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actual reasons Birks gave were not enough, and that those of his critics who protested against his jurisprudential assumptions were right. Smith is suggesting that Birks’s work, as it stands, is hard to defend without abstruse jurisprudential argumentation, which Birks himself did not make and which would have been unlikely to have achieved assent from the general legal community. The result is not Birks but an interpretivised Birks, a ‘best explanation’ of those writings of Birks which Smith thinks are worth preserving. The rest, which presumably includes most of the clearer pieces, now need calling back for burning. At the root of the controversy is not, I suggest, any real difference of method. There is nothing implicit in interpretive method that would deny that values change, or that the purposes embodied in law change. An interpretivist can argue for a particular view of what the law is today without necessarily claiming that this was always the law. Nonetheless, because interpretivists tend to cut themselves off from other disciplines, they may frequently be unaware of other changes. They may attempt to read precedents from the last century (or even the century before that) without much awareness that they are historical documents, and to read their own modern views into these documents. They may even be so misled as to claim to identify ‘timeless’ values or ‘fundamental and enduring structures’ of law, all the while showing no knowledge of any century but the present. To some minds, a claim to be describing eternal verities is a very exalted and worthy thing to be doing; but those with any real knowledge of other historical periods know how problematic such claims are, and so tend to avoid making them.

IV

M E T H O D O L O G I CA L I N T E R P R E T I V I S M : A S S E S S M E N T

As I noted earlier, there is an essential ambiguity of approach amongst interpretivists: is the method being proposed as simply one possible tool for those engaged in the study of the law or is it seen as essential? In this section, I evaluate the method on the first assumption, and in the following section I evaluate it on the second. Interpretivism is a very particular type of legal enquiry. It approaches its subject matter not with a methodologically open mind but with very definite views of what it will find and how it will find it. It looks for order in legal materials, in their own terms: it tries to make sense of them in their own terms. We would therefore expect it to be better at some tasks than others. If there is an order to be found in the legal materials at the very high level of abstraction at which it works, we would expect interpretivism to find it. But equally, we would expect it to be poor at recognising or acknowledging disorder: it tends to treat disorder as a mere appearance, as showing merely that we have not reached the end of the enquiry yet. It is

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also not very good at recognising when the important decisions have been delegated down to judges beyond the theorists’ purview (a not uncommon situation). To return to Beever and Rickett’s example of negligent misstatement,25 it is apparent that perfectly good arguments can be put for both the ‘reliance’ explanation and the ‘consent’ explanation. A theorist who insists that one solution is correct to the exclusion of the other has not understood what is going on: a full understanding has to include the realisation that either view can be held by competent legal theorists. If one of the two is to be ruled out, it can only be by official fiat, whether judicial or statutory. On that sort of issue, interpretivism hinders more than it helps.26 Interpretivism is therefore better at some things than others, and if it is to become an accepted part of legal theory its proponents need a better understanding of what it is good at and what it is not. Various points are in order here, with the general theme that interpretivists should do what they are good at and leave other types of theorist to do likewise. 1. Interpretivists prize order and system above all; it is unreasonable to expect everyone to share this preoccupation. The demands on modern legal systems are many and various. In fact, the demand that judges show consistency is very high up the list of concerns; as interpretivists rightly say, a certain amount of respect for this is a necessary part of the rule of law. And of course it is always valuable when a departure from an earlier approach is pointed out, so that its value can be assessed. But there is a risk that a thorough-going interpretivism will simply degenerate into criticism of any judicial innovation at all. A case in point is Beever and Rickett’s attack on White v Jones, which is condemned as ‘incoherent’; if the case is to be regarded as properly reasoned, ‘then law as a discipline must be regarded, in our view, as intellectually bankrupt’.27 Yet the very concerns Beever and Rickett raise were put to the court which decided it28; the Law Lords did not ignore them.29 What the case shows clearly is that the arguments which the interpretivists take to be the essential ones often turn out to be not so important in actual cases. The interpretivists have mistaken part of the range of possible legal arguments for the whole. It is good that the interpretivists are watching for where we have gone and can identify an innovation when they see one, but not all innovations are wrong. If the past deserves its shout in legal dialogue, so does the present—and the future. We

Above, text at n 3. For fuller discussion of the point see J Dietrich, ‘What is “Lawyering”? The Challenge of Taxonomy’ (2006) 65 CLJ 549, 556–60. 27 Beever and Rickett, above n 1, 333. 28 [1995] 2 AC 207, 242 (argument of JA Jolowicz QC) (HL). 29 See especially [1995] 2 AC 207, 293 (Lord Nolan). 25 26

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must look out for the interests of posterity even though posterity has, so far, done nothing for us. 2. Empirical work is vital for understanding what the legal system does. If interpretivists are determined to ignore it, it is all the more vital that others do not. The stress that interpretivists place on ‘law’s self-understanding’, on what lawyers and judges in the higher courts think they are doing, creates a very real danger if not balanced by empirical work on the actual effects of the legal system. And when interpretivists stress the logical comprehensiveness of the solutions they advocate, they need to be reminded that astrologists and phrenologists could say the same.30 The search for coherence is one tool, but it cannot be the only one; some connection with empirical reality is essential. Whether a sharp division of labour is really advisable—some researchers to assume that logical consistency is all, others to question it—may be doubted, but there can be no real dispute that intellectual upbringing and temperament cause real divisions. Many in the legal academy simply will not do empirical work whatever the incentives. It is another question, however, whether they can argue as if that work has not been done, or as if it were improper to refer to it. This division of intellectual labour here has actually resulted in a rather curious situation, though its full dimensions are not always appreciated. There are really only two significant parts of the legal system today which come close to the ideal the interpretivists seek, namely the general law of contract and the theory of unjust enrichment.31 In both instances there is relatively little relevant empirical work. Why is that? It is certainly not because it is impossible to frame or answer empirical questions about their subject matter. Rather, it is because the doctrinal theories are stated at such abstract levels that their relevance to the real world is impossible to demonstrate. Indeed, the one empirical study of contract law which most theorists have heard of says pretty much that: that the matters which contract law regards as important are not so regarded by the people to whom the law applies.32 None of this proves the interpretivists wrong, or even comes close to doing so. What it does do, however, is question their claim to be describing anything of importance. If actual contracting parties do not care about contract law, why should anyone else? Should the focus of the subject not shift back to the law of individual types of contracts (sale of goods, employment, etc)? What, indeed, is the point of a ‘law of contract’ (as opposed to a law of contracts)? Interpretive work which Compare P Schlag, ‘Law and Phrenology’ (1997) 110 Harvard Law Review 877. The omission of tort from this list is deliberate. For a review of conflicting approaches see eg S Deakin, ‘The Evolution of Tort’ (1999) 19 Oxford Journal of Legal Studies 537. See also C Robinette, ‘Can There be a Unified Theory of Torts?’ (2005) 43 Brandeis Law Journal 369. 32 S Macaulay, ‘Non-contractual Relations in Business’ (1963) 28 American Sociological Review 45. 30 31

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simply assumes that ‘contract’ is the unit of study does not advance the matter any further. Empirical questions are not the only ones to be asked here, but they are a vital part of our understanding of the law, and if interpretivists mean to ignore them then others must take up the burden. 3. Evaluative work is vital for understanding what the legal system does. If interpretivists are determined to ignore it, it is all the more vital that others do not. This proposition, I would hope, will meet with less opposition. While it is understandable that interpretivists will for now concentrate on the difficulties of their method, broader questions of whether their results are actually desirable will no doubt re-surface in time. However, there is a real difficulty, because some evaluative elements are in fact implicit in the interpretivist scheme. Indeed, they expressly advocate that theorists should use their ‘raw moral intuitions’ as a guide to the correct view.33 In response to Waddams’s criticism that this is likely to prioritise matters of no importance either to the parties or to the public, Smith responds that ‘[t]here is no external perspective from which claims of importance can be made’34: public views are irrelevant, because the public either do not have the interpretivists’ map before them or do not understand it. Such disregard for the public’s view, however, seems undemocratic; the undoubted fact that few members of the public understand the more abstruse legal theories seems insufficient excuse for neglecting their public concerns. And if Smith has ever been puzzled by the common criticism that lawyers are remote from common sense, let him ponder his own words. As will be apparent, the claim that interpretivism can tell us anything about the importance of particular legal concepts clearly shows that the exercise is at least in part evaluative—indeed, this is not denied. And it is also clear the theory does not prevent the theorists from feeding their own ideas of what a legal system should look like into their analysis. The question is how they can keep out other views in the way they seem to want to. If their map or scheme of the law determines significant features of the law, then in a democracy we would expect public values to have an influence. Public ignorance of the law’s inner working cannot be the whole point. Few people can, say, repair a damaged tank or plan a military campaign, but it does not follow that their views on whether a particular war should be fought should be ignored. So equally it is with law. The theorists’ judgements of which aspects of the legal system are important are heavily influenced by their own views on logical consistency within the law: if they cannot keep these ideas in perspective, then others in the legal academy must help them to do so.

33 34

Beever and Rickett, above n 1, 324. S Smith, ‘A Map’, above n 1, 380.

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4. Even at the conceptual level, law does not in practice work in the way that the interpretivists argue for. Its relevance needs more careful argument. In fact, interpretivists have not claimed that the legal system is staffed by conceptual thinkers continually seeking the ‘best explanation’ of the legal materials they have before them. While their theory captures some aspects of work in the very highest courts (though even there it ignores other aspects), it is acknowledged that the bulk of the work of the legal system is not carried on in this spirit at all. Rather, it is said that this more routine work consists of the application of rules and standards laid down by higher authorities: this application is not a simple process, but it is not a sham either. The fact that the principles which the interpretivists promote can be interpreted in many different ways does not make them meaningless. The interpretivist view of the legal system is accurate even though few of those involved in its day-to-day work can be said to believe it.35 The difficulty with this is that it is an apparently factual claim about how the lower courts work, yet it is very hard to see what sort of facts could prove it or disprove it. How, precisely, does a researcher distinguish between a judge who is ‘merely’ applying interpretivistically determined law and one who has taken into account other values? Judges are always saying things which one would not have expected from an interpretive point of view. How do we determine which of those things are permitted by interpretive theory and which are not? At the moment, we are given no clue. Smith suggests that the interpretivists’ maps of the law are as yet incomplete, and more detail is needed to resolve such issues.36 Beever and Rickett say that detailed application of the law is a matter of ‘judgment’, which they feel unable to define further.37 The obvious alternative argument, that detailed study of the lower courts’ judgments would very likely reveal value judgements that are quite impossible to reconcile with the interpretivists’ schemes, is not considered. As things stand, the interpretivists are on the horns of a dilemma. Either they leave their principles vague, in which case their theories will have no noticeable influence on particular cases; or they try to make them more specific, in which case they will be led to criticise significant numbers of decided cases as wrongly decided. This latter approach can only hope to be significant if they can add non-interpretivist criticism too. It is clear, therefore, that interpretive theory may sometimes produce valuable insights. It is also clear that those insights must be scrutinised with some suspicion by others precisely because of interpretivism’s lack of perspective. Since interpretivism treats the consistency and integrity of the Beever and Rickett, above n 1, 332. S Smith, ‘A Map’, above n 1, 379. Though there is a footnote citing I Kant, Critique of the Power of Judgement, trans P Guyer and E Matthews (New York, Cambridge University Press, 2000): Beever and Rickett, above n 1, 332. 35 36 37

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legal process as the main criterion, those who regard other values as equally, if not more, important may have to question the results. Smith does not question this; indeed, many of his observations on Waddams can be read as seeking the right balance here, teasing out which sorts of questions interpretivism is good for and which not. Long may this process continue.

V

IMPERIALISTIC INTERPRETIVISM: ASSESSMENT

Very different is the approach of Beever and Rickett. Taking interpretivism to be a largely accurate statement of what actually happens both in the superior courts and in legal academic discussion, they insist that non-interpretivist legal arguments are actually non-legal. In consequence, they deny validity to certain common types of legal argument (particularly, most appeals to public policy or to the purpose of particular legal rules). And university researchers who decline to respect the limits Beever and Rickett now lay down are said to have forfeited any right to call themselves legal academics, as ‘they will have abandoned the primary task of the academic lawyer, which is to treat the law as an academic discipline’.38 For Beever and Rickett, the integrity of the discipline of law is at stake. Yet the arguments employed seem rather broad-brush, and tend to oversimplify the choices on offer. It is surely not the case, for example, that we must choose between interpretivist judges and judges who simply act according to their own idiosyncratic tastes. The need to give public reasons always constrains judges, whether or not it constrains them in quite the way Beever and Rickett want, and it is hard to see how interpretivism prevents any judge from secretly acting on his or her private values. The argument also badly needs to distinguish between judges and academics: many of the reasons why judges are not well placed to be policy-makers simply do not apply to academics. Indeed, given the academics’ access to large research libraries and to the many relevant experts amongst their colleagues, one could argue that legal academics are ideally placed to answer the sort of questions which Beever and Rickett say that they should not touch. Why, then, do Beever and Rickett suggest otherwise? 1. Order versus chaos. It is claimed that an interpretivist approach is more predictable, and therefore makes the law easier to apply.39 But this is an empirical claim if anything, and no empirical evidence has been provided. It is not obvious that adoption of interpretivist modes of argument will result in a clearer statement of the law, or that such a clearer statement will result in quicker dispute resolution. Lack of predictability in 38 39

Beever and Rickett, above n 1, 336. Beever, ‘The Law’s Function’, above n 1, 310–11.

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dispute resolution has many roots. Beever talks in horrified tones of the notion that the law might be applied by each judge in his or her own individual way40; yet any barrister can tell you of cases that were impossible to resolve when stated abstractly in the pleadings, but which were settled the instant the identity of the trial judge became known. If predictability is really a concern of the interpretivists, then their brusque dismissal of other modes of argument cannot be the whole story. 2. Suspicion of instrumentalism. Another argument for interpretivism is that judges and legal academics are ill-equipped to tackle matters of social policy. By training lawyers’ attention on questions of the law’s internal consistency, interpretivism turns them away from social questions which they have no expertise in.41 How much merit there is in this must depend on the context. A mere inscrutable appeal to ‘public policy’ is, of course, hopeless as a justification for judicial action, but that may only mean that the relevant policy should be explained more clearly; and on matters of technical law, it seems strange to argue that judges are not well placed to discuss the purposes behind the law, which in many cases they may understand better than the parliamentarians who voted for them. The moral is not that the judges should avoid policy, but that they should avoid tasks which they cannot do properly but others can; it is hard to see that instrumentalist arguments will always, or even usually, fall into this category. Where the interpretivist argument falls down is its reluctance to admit that the purposes of law are many and various. For example, Beever argues that interpretivism rules out the existence of exemplary damages in tort, as the purpose of such damages is plainly to punish the defendant, whereas an interpretivist analysis of tort clearly shows that tort is not about punishing defendants but about compensating claimants.42 It is however difficult to accept that such a complex artefact as the law of tort has only one purpose or function. It is as if Beever notes that cars are generally designed to be as quiet as possible (and indeed are regarded as defective if noise-reduction components, such as the silencer, are broken), and therefore concludes that no car should have a hooter. Yet cars and the social purposes they serve are not so simple, and neither is tort. Given the wide variety of defendants against whom tort law may be invoked, it seems plain that some of them may require some special badge of opprobrium, even though most do not. The problem here may not be interpretivism but the attitude that so often seems to lie behind it: a pulling-away from the difficulties of the real world, a reluctance to allow Ibid, 313. Ibid, 308. A Beever, ‘The Structure of Aggravated and Exemplary Damages’ (2003) 23 Oxford Journal of Legal Studies 87. 40 41 42

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law to deal with complex problems even where they plainly call for a solution and even where the law seems the best agency to effect it. Where this attitude means that we baulk at the idea that something as broad as the law of tort may have more than one function, it is time to call a halt. In our over-lawyered world, it is on the whole quite healthy if even legal academics begin to question whether law can solve every problem. But more discrimination is needed. For many problems, law very often is the best solution available. And a refusal to discuss the purposes which may lead to the application of the law is not in itself a helpful contribution to the debate. 3. Lawyers’ self-image. Beever and Rickett also suggest that interpretivism is needed to preserve law as an academic discipline. Without interpretivist rigour, we will lose sight of which arguments are distinctively ‘legal’. If interpretivism is not part of the mainstream of legal thought, … then law will cease to hold any position as a discipline in its own right. It will become, at best, the handmaid of some other discipline or series of disciplines, and legal academics will be replaced by academic economists, political philosophers, and the like, who merely interpret case law and other legal material through the lenses of their own disciplines.43

It might be easier to take this (apparently rather alarmist) position more seriously if the interpretivists themselves avoided reference to other disciplines in making their argument. Their constant drawings on both philosophy and science make it hard to believe that they are serious about maintaining subject boundaries in the way they suggest. As it is, their view seems misleadingly essentialist. What does or does not count as a properly ‘legal’ argument has changed historically. Given that the law’s scope and functions have grown so much over the last century, it is not too surprising if what counts as a legal argument has also expanded; and, as Fiona Cownie observes, the view that legal materials must be seen in their social context can be regarded as the dominant one amongst modern law teachers.44 If Beever and Rickett wish to oppose this, they must do a lot more than simply point out that this expansion constitutes a change. It would be interesting, for example, to hear more of their contention that ‘contract, say, is more central to the discipline of law than is, say, family law’.45 (It would also be interesting to hear what family lawyers have to say on that question.) As it is, Beever and Rickett seem determined to shut the law away from the influence of other disciplines, believing that this will enhance its status and independence. There must be a suspicion that it will Beever and Rickett, above n 1, 337. F Cownie, Legal Academics—Culture and Identities (Oxford, Hart Publishing, 2004) esp 54–8 and 197–9. Compare R Collier, ‘“We’re All Socio-legal Now?”: Legal Education, Scholarship and the “Global Knowledge Economy”’ (2004) 26 Sydney Law Review 503. 45 Beever and Rickett, above n 1, 336 note 64. 43 44

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have precisely the opposite effect. By neglecting matters of social policy as practised today, its irrelevance to modern concerns seems assured. Barring the Law Faculty door to all but accredited interpretivists does not sound like a policy which will win friends and/or influence people. 4. Constitutional objections. Finally, it is said that embracing interpretivism will keep the judiciary within its proper constitutional bounds, rather than using a supposedly illegitimate, legislative model of decisionmaking.46 Again, the dangers of an overly broad argument are plain enough. Judges are not (as a rule) elected. This fact imposes sharp limits on what constitutes acceptable behaviour from them. Any judge who does not appreciate this is unlikely to enjoy a long tenure. It is surprising to hear, however, that these facts are not already very well appreciated, or that a major change in legal philosophy is required to drive them home, or that democracy is threatened by anything other than a rigid adherence to interpretivism. It must also be said that, coming after the abstruse theorising that preceded it, the argument sounds rather frivolous. ‘The constitution’s in danger!’ is never an argument to be made lightly; it must be made fully and seriously, or not at all. Complaints that the courts have been exceeding their proper function, either in general or specifically in relation to private law, have been made in a number of quarters, and are highly context-specific. The charge that the judges are interfering in matters properly left to the legislature can only be made on the basis of some understanding of what the legislature has done and could do in the area: if it is said that judges should not get involved with ‘policy’, the answer is that they need to know more about policy, not least so that they do not ignorantly blunder into areas they should stay out of. The proper bounds of constitutional adjudication cannot be known by pure intuition or ‘reflection’: and the cure for ignorance is more knowledge, not less. To the extent that interpretivism attempts to dissuade lawyers from acquiring that knowledge, it is misguided.

VI

THE B IG PICTURE

Mark Twain once eloquently explained why land is such a valuable commodity: ‘they’re not making it anymore’. Those who study the central areas of obligations have noticed a similar phenomenon, for no one is making much common law these days either. The great days of common law creativity are gone. Yet, strangely enough, this does not lead to its 46

Beever, ‘The Law’s Function’, above n 1, 313.

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being valued. In the legislature, the regular torrents of legislation either marginalise it or nibble away at it: if the island of the common law is not actually shrinking very much, certainly the statutory waters around it are becoming ever vaster and deeper. In the courts, judgments in obligations cases become ever more lengthy and technical, and inevitably advert to more and more factors which did not exist a century ago. And in the academy, both public law and the more specialised areas of private law gnaw at the supposed importance of central private law theory. Private law is increasingly dismissed as dull, antiquated and rule-bound, when contrasted with the shiny and sophisticated public law.47 Increasingly, it seems that contract and tort retain their place at the core of law degrees simply because they got there first; the argument that they are actually any more important or basic to law than other legal subdisciplines is harder and harder to make. Faced with such a threat, the interpretivists have chosen to look inward, returning to traditional ideas both as to theories of liability and as to legal methodology, and spurning modern developments, whether legal or political. They think, and sometimes even say, that they are on the verge of capturing some timeless entity that lies behind private law reasoning; some secret source of order behind the apparent chaos of the modern law. The claim to esoteric knowledge, which lies beyond ordinary comprehension yet breathes order into the universe, is often a powerful one emotionally; but for precisely that reason, it needs to be examined very closely indeed before its bona fides can be accepted. Distaste for disorder is understandable enough, but that is not sufficient reason to accept extraordinary claims made on weak evidence. The claim that any one theory behind obligations is the right one truly is extraordinary, for argument in the area is unceasing. And where argument has temporarily or locally ceased, it is rarely because the ‘right’ answer has been discovered by rational process. A far more common reason is that it has been imposed despite it: by a particularly important case or statute, or a particularly charismatic law teacher. Arguments about the ‘true basis’ or ‘structure’ of particular areas of case law rarely achieve unanimity, and are often little more than disputes over whether particular glasses are half full or half empty. The idea that the future of obligations should consist mainly of disputes of that sort strikes this writer as deeply depressing.

47 See especially M Loughlin, The Idea of Public Law (Oxford, Oxford University Press, 2003).

Part 3

Issues in the Law of Unjust Enrichment

12 Advance Contractual Payments: Enforcement and Restitution for Failure of Basis ADVANCE CONTRACTUAL PAYMENTS

PETE R BU T L E R * PETER BUTLER

I

I NTRO DUCTION

M

Y INTRODUCTION TO Peter Birks occurred when I attended with some fellow Australians his small Restitution class in the LLM degree course for 1970–71 at University College London. Peter’s enthusiasm for his subject matter was infectious as he continually plied our small group with long reading lists, sometimes without sign-posting to give us an opportunity to discern a developing legal rule for ourselves. To aid us for our weekly encounter, we had, in those days now long ago, the pioneering first edition of Goff and Jones1 as the prescribed text, and the benefit of a sound exposition of the case law earlier in the week from Bill Cornish’s seminars at the London School of Economics. Where it was helpful to the discussion, we would introduce a decision of the High Court of Australia. For me, it was a most stimulating and rewarding experience, which marked the beginning of a long affair with the law of restitution. It was good to have known Peter; it is a privilege to acknowledge my debt of gratitude and to pay tribute to him. In Part III of his ‘fitting final testament’, Unjust Enrichment, Peter Birks argues that an English law of restitution for unjust enrichment, which has come to be regarded as working through ‘unjust factors’, would have to be given up in favour of an English common law version of the civilian ‘sine causa’ approach, based on absence or failure of legal basis.2 I shall endeavour to show, in the particular frame of reference of restitution of Sometime Senior Lecturer, TC Beirne School of Law, The University of Queensland. R Goff and G Jones, The Law of Restitution (London, Sweet & Maxwell, 1966). P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn, 2005) x. ‘“Failure” tends to be favoured when the absence of basis supervenes after the receipt’ (at 119). *

1 2

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advance contractual payments arising in the context of discharge of an existing contractual obligation, that such a single explanatory basis is open to be drawn from long-established Australian authority. There are sound commercial reasons for a party insisting on an advance payment. First, in the case of a deposit it provides a form of security for performance by the other party.3 Secondly, it removes the risk that payment may not be made later, perhaps because of insolvency. Thirdly, the payment provides the recipient with the use of the money and helps his ‘cash-flow’.4 A fourth suggested reason is that if there is later a dispute over the adequacy of the return performance rendered under the contract, or if the paying party defaults on further payment, the party who has already been paid does not have the onus of starting legal proceedings.5 Since one contracting party will always benefit by the receipt of an advance payment made by the other party, in the event of the expected return performance not being received by failure of the contractual undertaking, there is the real possibility that the payment or payments made will unjustly enrich the recipient at the payer’s expense. Admittedly, if the failure has occurred as a result of the default of the payee, the payer may assert a compensatory remedy for its loss. But that may not always be a fruitful remedial option where the contract turns out to be a losing one, or where the payee is insolvent. Sometimes the payer will be the party in default. On occasions the failure to perform will be as a result of a supervening frustrating event. In such circumstances, a claim in restitution for unjust enrichment will be an advantageous option for the payer.6 The liability is strict and is not grounded in fault for the defendant’s breach. Being a debt-like claim for a liquidated amount, it does not attract the mitigation principle, and it may be brought with expedition in summary proceedings. Moreover, unlike a compensatory remedy in damages, it is provable as a debt where the defendant turns out to be insolvent. Before examining the claim in restitution it is important and useful, in order to appreciate the workings and consequences of discharge of a contract, to rehearse the performance rules governing the enforceability of contractual promises. The separation of the issue of recovery from the issue of liability to perform has contributed to the failure to recognise the

Howe v Smith (1884) 27 Ch D 89 (CA). Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 75 (HL); Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129, 1148 (HL); Baltic Shipping Co v Dillon (1993) 176 CLR 344, 388 (HCA). 5 Law Commission Working Paper No 65 (1975), Pecuniary Restitution on Breach of Contract, para 55. 6 In many jurisdictions where frustration has occurred statutes have been enacted to govern most contracts: see generally, K Mason and J Carter, Restitution Law in Australia (Sydney, Butterworths, 1995) [1236]—[1268]. However, those contracts to which the statutes do not apply and those jurisdictions without applicable statutes are governed by the common law. 3 4

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basal principle which provides the true as well as a satisfactory explanation for the claim in restitution, namely, absence or failure of basis.

II

PERFORMANCE 7

Under a bilateral contract parties in general bargain for an exchange of performances rather than for an exchange of promises.8 Although the consideration for each party’s promise is the other party’s return promise, each party enters into the transaction only because that party expects that the promise in return will be performed. The performance of each promise is made a condition of the duty to perform the other. The rules applicable to the performance stage of such contracts are, as they have evolved, directed primarily to protecting that expected performance against a possible failure of the other party to perform. A party who has not received the expected performance could, of course, be awarded a claim for damages. But the injured party bargained not for a right to sue, but for performance. Therefore, the courts have shaped rules to give the injured party, in addition to any damages claim, the right ultimately to refuse to perform if the other party fails to perform, and to treat the contract as no longer binding on him. The seminal case of Kingston v Preston9 introduced this development. Lord Mansfield first acknowledged that there were cases in which one promise under a bilateral contract was ‘independent’ of a return promise in the sense of its not being conditional on the performance of the return promise. In such a case, non-performance of the return promise provided no excuse for non-performance of the first promise, although the non-performance of the return promise was actionable as a breach. However, in addition, his Lordship stated that there were also cases in which one promise under a bilateral contract was ‘dependent’ on a return promise in the sense of being conditional on such return promise. In such a case, non-performance of the return promise, in addition to being actionable as a breach, was an excuse for the non-performance of the first promise. In some cases involving ‘dependent’ promises one party’s duty to perform will be dependent or conditional on the other party’s rendering a performance that is due at an earlier time. In such case, the other party’s performance is a ‘condition precedent’ to the first party’s duty to perform. In other cases involving ‘dependent promises’, where the parties undertake to perform concurrently or simultaneously, the two performances are said 7 See generally EA Farnsworth, Contracts (Boston, MA, Little Brown, 1982) 575–90; GH Treitel, The Law of Contract (London, Sweet & Maxwell, 10th edn, 1999) 705–10. 8 Fibrosa, n 4 above, 48; Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, 463–5 (HCA); OW Holmes, The Common Law (Boston, MA, Little Brown, 50th printing, 1923) 335 citing CC Langdell, Contracts (Boston, MA, Little Brown, 2nd edn, 1880) §106 and passim. 9 (1773) 2 Dougl 689 (KB).

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to be ‘concurrent conditions’.10 Thus, in a contract for the sale of goods, the seller must be ready and willing ‘to give possession of the goods in exchange for the price’ and the buyer must be ready and willing ‘to pay the price in exchange for possession’.11 In this way, the performance of each promise is made a condition of the duty to perform the other promise. In summary, then, under the rules governing the order in which contracting parties must perform, one party is entitled to refuse to perform and to be no longer bound if the other has failed to perform a condition precedent or a concurrent condition, but not if the other has failed to perform an independent promise.

Work Must Precede Payment If promises are held to be independent, each party is exposed to the risk of having to perform without any security for the performance of the other. To reduce this risk, the courts favour dependent promises unless the parties’ intention clearly points to independent promises. If one party’s duty to perform is held to be a condition precedent, that party is exposed to the same risk unless the two performances can be held to be concurrent conditions. Where simultaneous performance is not possible, performance by one party must necessarily be a condition precedent to the liability of the other. The party who goes first foregoes the security which simultaneous performance would afford and bears the burden of financing the transaction until the other party performs. Such a case is that of a contract to do work over a period of time. The doing of the work will take a period of time, the payment will not. In determining which party in the court’s view (rightly or wrongly) is more likely to default after the other has performed, the fact that money, being currency when possessed, is incontrovertibly of value so that the payee may be tempted to abscond without performing the promised work is most relevant. It is likely that this consideration has primarily led to the general rule as reflecting the community’s ‘common understanding’ that work is to be done first in order of time before the payment of money. The underlying reasons informing the rule are purely pragmatic considerations, and cannot be elicited from grammar or logic.12 In Automatic Fire Sprinklers Pty Ltd v Watson,13 Dixon J stated the position as follows: In certain forms of executory contract where the promise of one party is to pay the other money in consideration of his transferring property, of his doing work, Morton v Lamb (1797) 7 TR 125 (KB). See Sale of Goods Act 1896 (Qld), s 30. Holmes, n 8 above, 337–8; Farnsworth, n 7 above, 588; Treitel, n 7 above, 705, 708. (1946) 72 CLR 435, 463 (HCA) (emphasis added); see also Graham v Baker (1961) 106 CLR 340, 345 (HCA). 10 11 12 13

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of his serving the former as his master, and, perhaps, of his providing other tangible things or definite services, the money to be paid is regarded as the price of or the reward for the property or service when and so often as the transfer of the one or the performance of the other affords an executed consideration. In these contracts the promise to pay the price or the reward is not construed as a simple obligation to pay a sum or sums at a future date supported solely by a consideration consisting in the corresponding promise to transfer the property, do the work, serve, or provide the things or services by the other party, so that a mere readiness and willingness on the one side of the latter to perform his part is enough to entitle him to the payments, notwithstanding that, whether owing to the fault of the former, or without fault on either side, the property is not transferred, the work is not done, the relation of master and servant ceases, or the things or services are not provided. The most familiar example is that of the sale of goods. There the common understanding of an agreement to sell is that it is the goods and not the promises to deliver that are to be paid for. The result is that, if the seller tenders goods in accordance with his contract but the buyer rejects them in breach of his contract, the seller cannot sue for the price; his remedy is for unliquidated damages for non-acceptance: Cp Plaimar Ltd v Waters Trading Co Ltd (1945) 72 CLR 304, 318. It is nothing to the point that the seller remains ready and willing to deliver the goods and refuses to treat the rejection as discharging the contract, but, on the contrary, ‘keeps it open’. Even so the price is not payable, for the reason that it is for the goods that the price is to be paid and until they are accepted there is no indebtedness . . . A contract for the establishment of master and servant falls into the same general category of agreement to pay in respect of the consideration when and so often as it is executed, and is, therefore, commonly understood as involving no liability for wages or salary unless earned by service, even though the failure to serve is the consequence of the master’s wrongful act.

In fact, even where simultaneous performance is essentially possible, Dixon J has affirmed the correctness of the following analysis:14 As Lord Campbell said in Timmins v Gibbins (1852) 18 QB 722, 726; 118 ER 273, 274, it is difficult to say that there be any case in which the debt is not antecedent to the payment. Even where the money is paid over the counter at the time of the sale, there must be a moment of time during which the purchaser is indebted to the vendor. The payment is made in advance to await application in discharge of an indebtedness which arises eo instanti when enjoyment of the consideration commences.

The paramount importance of the general rule, based on the community’s ‘common understanding’ that ‘work must precede payment’, should not be underestimated or ignored. Contextually, the word ‘payment’ means ‘giving what is due in discharge of a debt or for services done or goods received’. The very fact that the reasoning in the cases adopts the usage of ‘pre-payment’ or ‘advance payment’ tells strongly of the pre-eminence of 14

Australian Guarantee Corp Ltd v Balding (1930) 43 CLR 140, 160 (HCA).

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the rule. As Dixon J stated, it impacts on contracts of service, such as employment and construction contracts. It also affects contracts to transfer property over a period of time. Although, in theory, parties can depart from the rule, the cases point to its entrenchment as a basic, pivotal principle from which the parties can depart in a subsidiary manner. So, in practice, its effect on employment contracts has been significantly reduced by according to the employee a right to frequent periodic payments of wages, such as weekly, fortnightly or monthly remuneration.15 Furthermore, its effect on contracts for the sale of land and construction and other contracts involving the doing of work has been reduced by express agreements that instalment payments and progress payments are to be made in advance of the contracted-for performance. Consider advance instalment payments under a contract for the sale of land. An initial view was that instalments of purchase money could not be recovered because the purchase price was payable for the land, not for the promise to convey, and therefore was not recoverable except upon conveyance.16 On that view, a vendor of land could only sue at law for damages for loss of the sale. Another view treats advance instalment payments for the purchase of land as imposing an independent obligation on the part of the purchaser to pay certain sums on fixed dates in exchange for a promise to convey and at the risk that, for some unforeseen reason, a conveyance may never be obtained. In that event, if the vendor was in default, the purchaser could sue for damages for his loss.17 In Automatic Fire Sprinklers, in an illuminating passage to which I shall return later, Dixon J postulated a further view of the payment in advance of the price, whether for land or for goods:18 [It] is that, even where it is stipulated for independently of the actual transfer of the property, it can amount to no more than the provision of a sum in the hands of the vendor to be applied by him in satisfaction of the debt arising from the transfer of the property in the goods or the land when it is accomplished. That is to say, that, at most, it is a payment of a debt in advance, a debt that can only arise from the execution of the consideration. Up till then it is a promise to pay money which if fulfilled or enforced, results in a provisional payment defeasible by the subsequent failure, for any cause, of the real consideration. It is a payment made in advance to await application in discharge of an indebtedness which arises immediately the consideration is executed.

15 See JW Carter and DJ Harland, Contract Law in Australia (Sydney, Butterworths, 4th edn, 2002) [1828]. 16 Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, 464 (HCA) citing Laird v Pim (1841) 7 M&W 474 (Ct of Exchequer); Smith v Noske [1913] VLR 329 (SCVic); Ruddenklau v Charlesworth (1925) NZLR 161,164 (NZCA). 17 Reynolds v Fury (1921) VLR 14 (SCVic); Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, 464 (HCA). 18 (1946) 72 CLR 435, 465 (HCA) (emphasis added).

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Prior to the arising of that ultimate debt on transfer of the property, the advance payment is payable in fulfilment of or by way of enforcement of a separate claim to a liquidated sum—a debt—that is founded on the contractual promise to pay that sum on a stipulated advance date. Construction contracts undertaking a specified work, for example, a building or a ship, involving the input of labour and the incorporation of materials and components are regarded as entire with respect to the quantity of work to be effected.19 Substantial performance of the work would have to be executed for a debt to arise in the amount of the specific price agreed upon or, if no price was agreed, of the reasonable value of the labour and goods supplied. Advance payments are commonly made as the work progresses, based frequently on the certificate of the building owner’s inspector, for example, an engineer, architect or quantity surveyor, certifying as to the value of work done and the materials actually delivered. Such payments in accordance with long-established judicial authority are ‘“provisional and subject to adjustment or readjustment at the end of the contract” and also . . . in cases of error or mistake before its end’: John Grant & Sons Ltd v Trocadero Building and Investment Co Ltd.20 They are made as an advance on account of the price of the work when it becomes due and owing on completion, and are not determinative of an accrued right to be paid part of the price for the labour and materials supplied.21 Even if the progress payments are not conditioned on anyone’s certification, they will still be construed as being provisional and subject to adjustment.22 The promise to make a progress payment constitutes a debt due to the plaintiff.23 Further means which the courts employ to adjust and balance the respective rights and risks of parties to a bilateral contract are the rules relating to entire and divisible obligations, and the doctrine of substantial performance. It has been said that [A]n entire contract or, perhaps more accurately, an entire obligation is one in which the consideration for the payment of money or for the rendering of some other counter-performance is entire and indivisible.24

Where a party fails to effect complete performance of an entire obligation, the other party is entitled to refuse to pay. At common law the provider of the performance is generally not entitled to any other recompense for the 19 Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689, 717 (HL); Chalet Homes Proprietary Ltd v Kelly [1978] QdR 389 (SCQ); Ownit Homes Pty Ltd v Batchelor [1983] 2 QdR 124, 135 (SCQ). 20 (1937–38) 60 CLR 1, 23 (HCA) citing Tharsis Sulphur and Copper Co v M’Elroy & Sons (1878) 3 App Cas 1040, 1045 (HL) (emphasis added). 21 Tharsis Sulphur, ibid. 22 Ownit Homes Pty Ltd v Batchelor [1983] 2 QdR 124, 134 (SCQ). 23 John Grant, n 20 above, citing Pickering v Ilfracombe Railway Co (1868) LR 3 CP 235 (Common Pleas). 24 Baltic Shipping Co v Dillon (1993) 176 CLR 344, 350 (HCA).

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incomplete performance that he has actually rendered.25 The rule applies whether or not the failure to perform is a breach. In contrast, a contractual obligation will be regarded as divisible if it is possible to apportion, usually, but not always, successively, the parties’ performances into discrete pairs of performance and corresponding counter-performance, and the parts of each pair can be regarded as agreed equivalents.26 The threshold requirement of apportionment into discrete pairs will be satisfied if the performance is capable of division into parts and the price for parts of the performance can be determined. However, even if apportionment is possible, the parts of each pair must be regarded as agreed equivalents. This requirement is implicit rather than explicit in the cases. The crucial issue is whether the part performances can be fairly regarded as of roughly equivalent value to the injured party when viewed in the context of his expectations as to the agreement as a whole. Thus, a contract would be divisible with regard to a quantity of goods to be delivered where a seller agrees to make instalment deliveries of that quantity and the buyer agrees to pay for each instalment when delivered, for example, twelve dozen eggs at $3.60 a dozen by way of one dozen weekly in return for payment of $3.60. Both apportionment and agreed equivalents are satisfied. By way of contrast, a contract to deliver twelve dozen eggs at $3.60 a dozen is entire with respect to quantity. The fact that the subject matter is capable of apportionment into corresponding pairs of part-performances does not make the obligation divisible where the buyer required and expected to obtain twelve dozen eggs and nothing less.27 Similarly, where a builder contracts to do specified work for a specific price for an owner, the fact that there is a provision for progress payments does not make the obligation with respect to the work to be done divisible28: first, it is not possible to conclude that the payments made progressively have commensurately advanced the owner’s interest until the building has been substantially completed; and, secondly, even if prices are stated separately or for units of work, that fact will not make the contract divisible if the injured party cannot make full use of the part that he has received without the rest.29 Apportionment legislation providing that rents, annuities, dividends and other periodical payments in the nature of income, like interest on money lent, accrue from day to day may be relevant.30

25 See, eg Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 (HCA); Steele v Tardiani (1946) 72 CLR 386 (HCA), citing Sumpter v Hedges [1898] 1 QB 673 (CA). 26 Restatement of the Law of Contracts, Second (1987), §240. 27 Cf Sale of Goods Act 1896 (Qld), s 32 and other state analogues; see also Fehlburg v Stanton (1960) ALR 299, 301 (HCA). 28 See cases cited at n 19 above. 29 See Farnsworth, n 7 above, § 8.13. 30 Property Law Act 1974 (Qld), ss 232–3 and other state analogues. See generally Carter and Harland, n 15 above, [1827].

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The emergence of the performance rules governing dependent promises that the provider’s performance is made a condition of the recipient’s duty to perform his promise by payment created harsh effects where, as traditionally applied, strict performance excluding trifles was regarded as a condition of the recipient’s duty to pay. If, for example, strict performance by a builder was regarded as a condition of the owner’s duty to pay, the slightest breach by the builder would deprive him of all right to payment under the contract. To ameliorate the harsh effect, the doctrine evolved that only ‘substantial performance’ is required of the first party before he can recover under the contract, less any damages to which the owner is entitled because of the breach. Courts have applied the doctrine mainly to contracts for the doing of work, particularly construction contracts. Ultimately, however, it is a question of construction whether the doctrine applies to the contract in a given case.31 The doctrine of substantial performance is also potentially applicable to divisible obligations. In that event, substantial performance of each discrete part will entitle the performing party to the price allocated to that part, but again subject to a counter-claim for damages for any losses caused by the deficiency in performance.32

III

FAI L U R E TO P E R F O R M

Having considered the operation of the performance rules as they have evolved in relation to obligations under bilateral contracts, we can turn to consider the effect of a failure of performance on the liability of the payer under a duty to pay advance contractual payments, in relation to rights accrued due but unpaid, and the restitution of advance payments already made. The initial well known statement of principle is that of Dixon J in McDonald v Dennys Lascelles Ltd:33 When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected . . . But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its 31 Hoenig v Isaacs [1952] 2 All ER 176, 178 (CA); see generally Carter and Harland, n 15 above, [1830]–[1835]. 32 Steele v Tardiani (1946) 72 CLR 386, 401 (HCA). 33 (1933) 48 CLR 457, 476 (HCA) (emphasis added).

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root, the contract is determined so far as it is executory only and the party in default is liable for damages in its breach.

While Dixon J speaks of the party not in default electing to treat the contract as no longer binding, and of the contract being dissolved, it is the parties’ primary obligations which are affected, not the contract itself. Those obligations which are executory, remaining unperformed at the time of the election, are discharged for the future, and by substitutive legal operation of the contract the party in default is secondarily obliged to pay compensation.34 A significant consequence of the mutual dependency and conditionality of promised performances under a bilateral contract is that it is the failure of performance, the happening of an event, which relieves the other party from further performance of his obligations.35 As Lord Porter said in Fibrosa: ‘[I]t is not the breach but the failure of consideration which enables money paid in advance to be recovered.’36 This is so whether the failure of performance is the result of supervening impossibility or frustration, of a serious breach by one party of his contractual obligations, of non-fulfilment of a contingent condition, or consent including mutual abandonment. The failure of performance enables the promisee to say that the condition of his obligation to perform has failed. Where there is a frustrating event, the discharge occurs automatically from the time of the failure of performance brought about by the frustrating event. However, where the failure of performance occurs as a result of a serious breach of contract or non-fulfilment of a contingent condition, it is well established that, unless the parties have expressly agreed to a contrary result, the breach does not automatically terminate the parties’ obligations to perform. Termination is a matter of election to be made by the party not in default. The courts have invoked the doctrine of election to uphold the legal and moral rule that a man should not be allowed to take advantage of his own wrong by, in this context, his own default bringing about a failure of performance which relieves him of the performance of further undertakings.37 Nonetheless, the failure of performance with its resulting potential unjust enrichment of the payee is the operative event which enables the party not in default to say that he is released or discharged from his obligations to perform. It is not the promisee’s termination which brings about a failure of performance. The weight of authority holds that Photoproduction Ltd v Securicor Ltd [1980] 2 WLR 283, 291 and 294–5 (HL). Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (CA); AM Shea, ‘Discharge from Performance of Contract by Failure of Condition’ (1979) 42 MLR 623; S Meier, ‘Unjust Factors and Legal Grounds’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment—Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 37, 66–67. 36 n 4 above, 83. 37 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 (HCA); Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 65 (CA). 34 35

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the discharge takes effect from the time of the termination and that it is not retrospective to the time of the failure of performance. However, apart from some aberrant English decisions to be discussed herein, most authorities apply the discharging effect to all unperformed promissory obligations.38 Furthermore, in later discussion it will be suggested that discharge works retrospectively to annul advance payments. On discharge of the contractual obligations for the future, certain rights described as ‘unconditionally acquired rights’ are not divested or discharged. Rights which arise from ‘partial execution of the contract’ are identified as continuing unaffected, and therefore as falling within that description. Examples of such rights are rights to be paid sums of money fixed by the contract, which payments accrue due on the performance of a divisible portion of the contractual performance.39 A key requirement is that the right has arisen from ‘partial execution’ of the contract: Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd.40 In that case, Dixon and Evatt JJ emphasised the importance of vestitive facts which have been brought about by performance before the termination:41 [I]f all the facts have occurred which entitle one party to such a right as a debt, a distinct chose in action which for many purposes is conceived as possessing proprietary characteristics, the fact that the right to payment is future or is contingent upon some event, not involving further performance of the contract, does not prevent it maturing into an immediately enforceable obligation.

The High Court of Australia held that a debt can come into existence even if the obligation to pay is contingent on the happening of an event external to the contract. On the other hand, rights which have not unconditionally accrued due from partial execution of the contract are no longer enforceable; and the corresponding primary obligations not yet fully performed are discharged. This was the situation in Dennys Lascelles. That case was concerned with a contract for the sale of land on terms in which the purchaser went into possession and agreed to pay the price by instalments, the transfer of title to be postponed until payment of the final instalment. The vendor terminated the contract for the purchaser’s repudiation prior to transfer of title. The liability of a guarantor to pay an overdue instalment was in issue, which in turn required the court to examine the purchaser’s liability. The High Court of Australia held, in effect, that the liability of the purchaser to pay the instalment had been discharged. The purchaser was no longer 38 See NC Seddon and MP Ellinghaus, Cheshire & Fifoot’s Law of Contract (Sydney, Lexis Nexis Butterworths, 8th Australian edn, 2002) [21.34]; Mason and Carter, n 6 above, [1129]. 39 See text at nn 26–9 above. 40 (1935–36) 54 CLR 361, 379 (HCA); see also Elkhoury v Farrow Mortgage Services Pty Ltd (in liq) (1993) 114 ALR 541 (FCA). 41 Ibid, 380 (HCA).

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liable to make payment of the overdue instalment at the time of discharge because the payment, if it had been made, would have been recoverable by the purchaser for failure of consideration. In other words, the right to be paid was simply founded on a promise which was discharged. It could not be said that the right to be paid was an unconditionally accrued right arising independently of the promise from partial execution of the contract. In the aberrant English decision of Hyundai Heavy Industries Co Ltd v Papadopolous,42 a shipbuilder agreed to ‘build’, which included design work, ‘launch, equip and complete’ a ship for a price payable in five instalments. Article 10 of the contract provided that payments made by the buyer prior to delivery shall constitute ‘advances’ to the builder. Article 11 constituted a comprehensive cancellation clause which preserved the rights, powers and remedies of the builder under the general law. A provision of the Article provided an accounting process whereby, ultimately, the balance of any proceeds of sale of the ship, finished or unfinished, shall be paid to the buyer. Another provision provided that, in the event of cancellation, instalments ‘already paid’ were to be retained and applied by the builder to recovery of the builder’s loss and damage. However, although instalments ‘already paid’ were thus provided for, there was no provision as to other instalments. The second instalment was not paid on the due date. The ship builder cancelled under the cancellation clause and sued the appellants under a guarantee. By a 3–2 majority, the House of Lords upheld the builder’s claim. Accordingly, the buyer remained liable for the second instalment despite the termination and the appellants remained liable under the guarantee. Viscount Dilhorne and Lord Fraser distinguished construction contracts from contracts for the sale of land. In sale contracts after cancellation, the buyer, to avoid circuity of action, ceases to be liable to pay an instalment because he would have been entitled to be repaid the instalment, if it had been paid, for failure of transfer of title. With sale contracts, the vendor is simply obliged to deliver and transfer property to the buyer. In contrast, with a building contract, Lord Fraser emphasised that the builder was obliged to incur considerable expense before the actual transfer of property in the ship could take place. Moreover, he assumed in the absence of evidence to the contrary, in relation to what was an entire obligation, that work had been performed so that ‘the builder had acquired a vested right to the debt which was owed by the buyer at the date of cancellation’. Thereby, his Lordship, without adverting to the general rule that ‘work must precede payment’, reversed the onus of proof which lies on the provider of the performance to satisfy, and also ignored the entire-divisible obligations distinction. In addition, their Lordships cited cases involving divisible obligations in 42

[1980] 1 WLR 1129 (HL).

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contracts of hire,43 in a contract for the construction of a railway44 and in a contract of loan with accruing interest45 as providing analogous support for the proposition that termination did not alter accrued rights for the payment of instalments in a shipbuilding contract. As we have already noted with divisible obligations, the rights are not founded on a contractual promise but arise from execution of each divisible portion of completed performance, whereas the shipbuilding contract in question is entire. Such analogy is, therefore, invalid and erroneous. Lord Edmund Davies, contrary to the parties’ express intention in Article 10 that the instalments were ‘advances’, that is, on account of the price and thus dependent on the price being earned from the building of the ship, first seemed to argue that the payment obligation in respect of the instalments ‘on a specified date of a specified sum’ was independent of the builder’s obligation. His Lordship then cited with approval Professor Treitel’s statement that on discharge the party in breach is not released from ‘primary obligations already due’,46 a view inconsistent with other authorities.47 In further support he cited Dixon J’s well-known passage in Dennys Lascelles, but without addressing whether the right to be paid the instalment has unconditionally accrued based on vestitive facts arising from partial execution of the contract. In Stocznia Gdanska SA v Latvian Shipping Co48 the House of Lords upheld the decision in Hyundai Heavy Industries. The case was concerned again with the enforceability of instalment payments under two of six shipbuilding contracts to ‘design, build, complete, and deliver’ six vessels. Each contract was in terms very similar to that in Hyundai Heavy Industries. Second instalments of 20 per cent had fallen due but had not been paid. The shipyard terminated both contracts in accordance with a contractual provision (clause 5.05). In response to the shipbuilder’s claim for the instalment amounts, the buyers argued that they did not have to pay because there was a total failure of consideration in respect of each instalment. Lord Goff, following the approach adopted by Viscount Dilhorne and Lord Fraser in Hyundai Heavy Industries, distinguished construction contracts from contracts for the sale of land and goods. His Lordship, accepting the shipbuilder’s argument, upheld the buyers’ liability to pay the instalments.

43 Brooks v Beirnstein [1909] 1 KB 98 (HC); Chatterton v Maclean [1951] 1 All ER 761 (HC). 44 Newfoundland Government v Newfoundland Railway Co. (1888) 13 App Cas 199 (PC). 45 Lep Air Services Ltd v Rolloswin Investments Ltd [1973] AC 331 (HL). 46 GH Treitel, Law of Contract (London, Stevens, 5th edn, 1979) 641. 47 See Mason and Carter, n 6 above, [1129]. 48 [1998] 1 WLR 574 (HL).

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The fact that the contract has been brought to an end before the property in the vessel or any part of the vessel has passed to the buyers does not prevent the yard from asserting that there has been no total failure of consideration.49

Reflecting Lord Fraser’s approach, Lord Goff reasoned that a contrary view would lead to the conclusion that [N]o consideration would have been furnished by the yard when instalments of the price fell due before the moment of delivery, notwithstanding all the heavy and irreversible financial commitments then undertaken by the yard.50

In this reasoning, a restitutionary rule, ‘failure of promised performance’, rather than a contractual rule is, oddly, being invoked to determine liability to pay the advance payment. In applying that restitutionary rule, the formal distinction which is drawn between contracts for sales of land and goods and contracts for the provision of work or services and materials is capable of delivering ‘rough justice’. The leading modern English restitutionary case of Fibrosa51 demonstrates the arbitrary nature of the approach. A Polish company contracted with an English company for the making of textile machinery to special order and made an advance part payment. The contract was frustrated when enemy German forces invaded Poland. The case is formally distinguishable from Hyundai Heavy Industries and Stocznia Gdanska in that the contract was ultimately construed to be one, not of work and materials, but of sale, and the payment was recovered for failure of consideration. Yet, just as in those shipbuilding cases, it is probable that the manufacturer incurred expenditure in making the machinery in reliance on the prepayment, and would have suffered financial detriment if the special machinery had not been sold.

Annulment of Advance Payment: Restitution of Money Advanced In what circumstances will an advance contractual payment be recoverable? In Dennys Lascelles Dixon J reasoned: When a contract stipulates for payment of part of the purchase money in advance, the purchaser relying only on the vendor’s promise to give him a conveyance, the vendor is entitled to enforce payment before the time has arrived for conveying the land; yet his title to retain the money has been considered not to be absolute but conditional upon the subsequent completion of the contract. ‘The very idea of payment falls to the ground when both have treated the bargain as at an end; and from that moment the vendor holds the money advanced to the use of the purchaser.’ (Palmer v Temple (1839) 9 Ad & E at pp 520, 521; 49 50 51

Ibid, 588. Ibid. n 4 above.

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112 ER at p1309. In Laird v Pim (1841) 7 M & W at p 478; 151 ER at p 854, Parke B says: ‘It is clear he cannot have the land and its value too . . .’)52

The last sentence suggests that a general principle of unjust enrichment informs the recoverability of the purchase money that has been paid in advance. In an influential article, Beatson interpreted the above passage, together with the well-known passage cited earlier,53 as supportive of a distinction between an unconditional (or absolute) and a conditional right to an advance payment based on the construction of the contract. Recovery of an advance payment made under a contract that is discharged for the payer’s breach is based on the parties’ intention rather than on unjust enrichment. He suggests there is an unconditional right to a payment in advance so that it remains due or is irrecoverable on discharge where: (i) the payment is required as security for due performance, as an earnest; and (ii) accommodating Hyundai Heavy Industries, the party to whom payment is due has incurred or is likely to incur expenses before completing performance. In all other cases [T]he right to the payment is conditional upon the subsequent completion of the contract. Where the contract is discharged before completion the condition fails and the payment ceases to be due or is recoverable.54

That article is cited with apparent approval in the reasoning of the High Court of Australia in Baltic Shipping Co v Dillon.55 The claimant, a passenger on a 14-day holiday cruise from Sydney to Sydney, was injured, lost property, and was also distressed and disappointed when the cruise ship foundered on the tenth day. In the lower court hearing the claimant recovered her whole fare, and not just the proportionate refund she had received under the contractual terms, because the shipwreck negated the benefits received in the days before. On ultimate appeal the claim for restitution of the full fare could not be sustained. First, the claimant before the disaster had partly enjoyed a substantial part of the benefits of the contract, so that there was no total failure of consideration to found the claim. Secondly, as an alternative ground, drawing on Beatson’s contractual approach, the payment of the fare, as a matter of construction, was not conditional on the performance by the cruise operator of its entire contractual obligations to perform the complete voyage; rather, it was absolute, as the contract called for performance by the operator of its contractual obligations from the very commencement of the n 33 above, 477. Ibid. J Beatson, ‘Discharge for Breach: the Position of Instalments, Deposits and Other Payments Due Before Completion’ (1981) 97 LQR 389, 418, also published in revised form in J Beatson, The Use and Abuse of Unjust Enrichment (Oxford, Clarendon, 1991) ch 3, 76. See also IM Jackman, The Varieties of Restitution (Leichardt, Federation Press, 1998) 57–60 and 85–6; P Jaffey, The Nature and Scope of Restitution (Oxford, Hart Publishing, 2000) ch 2. 55 (1993) 176 CLR 344 (HCA). 52 53 54

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voyage.56 Beatson’s article also seems to have influenced the House of Lords’ interpretation of Dennys Lascelles in Stocznia Gdansksa SA v Latvian Shipping Co.57 Of sales contracts, Lord Goff, citing Dies v British and International Mining and Finance Corp Ltd 58 and the ‘much-quoted judgment’ of Dixon J in Dennys Lascelles, interpolated that It has been held that the buyer’s remedy is contractual, the seller’s title to retain the money being conditional upon his completing the contract.59

As Beatson acknowledges, the disadvantage with the contractual constructionist approach, just like the restitutionary approach, is that the justice is rough, because under this approach there is no need for the value of the performance to correspond to the amount of the advance payment. In a contract involving the provision of work and services, once the work or services commence, the advance payment, initially conditional, becomes absolute, and there is the real possibility that the payee may be unjustly enriched. Beatson would recognise that equitable relief may be available where it would be unconscionable to retain or recover the payment. But the availability of such relief must be regarded as uncertain, especially for commercial-type contracts. Carter and Tolhurst60 argue that the use to which Dixon J’s judgment has been put is irreconcilable with his apparent intention, but also with the decision in Fibrosa.61 They argue that a purchaser’s right of recovery is not contractual but restitutionary, unless there is an express provision for repayment. They note the clear parallels between Dixon J’s statement in Dennys Lascelles, referring to the right of recovery in terms of ‘an implication made at law’62 and the speeches in Fibrosa exemplified by Lord Wright’s analysis: The right . . . to claim repayment of money paid in advance must in principle . . . attach at the moment of dissolution. The payment was originally conditional. The condition of retaining it is eventual performance. Accordingly, when that condition fails the right to retain the money must simultaneously fail. It is not like a claim for damages for breach of the contract, nor is it a claim under the contract. It is in theory and is expressed to be a claim to recover money, received to the use of the plaintiff.63

While I support the main thrust of the authors’ argument, I am not able to accept all their reasoning. It cannot be ignored that the advance payment Ibid, 351, 381 and 390–1 (HCA). [1998] 1 WLR 574 (HL). [1939] 1 KB 724 (HC). n 57 above, 589. JW Carter and GJ Tolhurst, ‘Conditional Payments and Failure of Consideration: Contract or Restitution?’ (2001) 9 Asia Pacific Law Review 1. 61 n 4 above. 62 n 33 above, 478. 63 n 4 above, 65 (emphasis added). 56 57 58 59 60

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discharges a valid legal obligation to pay a sum certain—a debt—which is founded on an existing contractual promise to pay money. For an obligation in unjust enrichment to be imposed whereby the payee must restore an equivalent amount of money to the payer, that advance payment with its concomitant legal effect of discharging the legal obligation must first be annulled or invalidated. In Dennys Lascelles Dixon J implicitly recognises that, on discharge, certain rights will be ‘divested or discharged’ which have not already been unconditionally acquired. What is significant is that later, in Automatic Fire Sprinklers, in a passage which I have already set out, His Honour makes express reference to the payment made in advance of the price in fulfilment or enforcement of the contractual promise as resulting in a ‘provisional payment’ which is ‘defeasible’—that is, capable of annulment or invalidation—‘by the subsequent failure, for any cause, of the real consideration.’ In Fibrosa the House of Lords, in holding that the right to recover rests on the failure of the other party’s performance, failed to address the objection that the restitutionary right would have arisen despite the validity of the contractual obligation by which the payment was made. In failing to advance an analysis which recognises the defeasibility of the contractual obligation by which the payment was made, the House of Lords would appear to have erred in not exposing with exactitude the true basal principle which provides the basis for the restitutionary claim.64 Once the necessary step is taken to recognise that any payment which is made in discharge of the then existing promissory obligation to pay money in advance of the other party’s promised performance is annulled or invalidated by the subsequent failure, for whatever cause, of that performance, the true basal principle is revealed to be the absence or failure of the promissory obligation to pay the money in advance.65 The invalidation of the advance payment would seem to work retrospectively, but selectively apart from the other obligations in the contract.66 When a contract consists of divisible obligations being performed, part of an advance payment will be appropriated incrementally towards discharge of the debts arising as each discrete, corresponding portion of performance is executed. If the contract is frustrated or terminated, any part of the advance not so appropriated will be recoverable in restitution for failure of basis.67 64 See Meier, n 35 above, 66; Birks, n 2 above, 140–1. In Chandler v Webster [1904] 1 KB 493, 499 (CA), overruled in Fibrosa, Collins MR seems to advert to the need to ‘wipe out’ the contractual obligation requiring the prepayment, but considered that authority to do so was lacking. 65 Birks, n 2 above, 139–41. 66 See Treitel, n 7 above, 789; S Meier, ‘Restitution after Void Contracts’ in P Birks and F Rose, Lessons of the Swaps Litigation (London, Mansfield Press, 2000)168, 171; contrast Carter and Tolhurst, n 56 above, 9; Birks, n 2 above, 125, 141; and P Jaffey, ‘Restitutionary Claims Arising on Contractual Termination’ in EJH Schrage, Unjust Enrichment and the Law of Contract (New York, Kluwer Law International, 2001) 243, 247–8. 67 Fibrosa, n 4 above, 77 (HL); Fehlburg v Stanton (1960) ALR 299, 301 (HCA).

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It is also to be noted that Dixon J in Automatic Fire Sprinklers has adopted the term ‘provisional payment’ rather than ‘conditional payment’ as implied in Dennys Lascelles. The word ‘provisional’ means ‘provided for the time being, pending further arrangements’, ‘providing for immediate needs only, temporary’. In Fibrosa Lord Roche commented that ‘the sum sued for was of this provisional nature. It was part of a lump-sum price, and when it was paid it was no more than a payment on account of the price’.68 That is, the payment did not discharge part of the price. Earlier, in John Grant & Sons69 that description of a payment as ‘provisional and subject to adjustment or readjustment at the end of the contract’ had been applied to advance payments under a construction contract. Later, in York Air Conditioning and Refrigeration (Australasia) Pty Ltd v Commonwealth,70 Dixon J repeated the use of this concept. He described progress payments made under a construction contract thus: ‘[T]he character of the progress payments was that of payments made and received on account of a liability yet finally to be ascertained. Such a payment is prima facie to be considered provisional.’71 Although Dixon J in Automatic Fire Sprinklers employed the term ‘provisional payment’ in the context of a contract of sale, it is applicable in principle to the ‘general category of agreements to pay in respect of the consideration [that is, the other party’s promised performance] when and so often as it is executed’. In this category His Honour identified contracts transferring property, doing work, serving an employer, and providing other tangible things or services. The term ‘provisional payment’ is a more appropriate concept than ‘conditional payment’, for it avoids the suggestion that the right of recovery may have a contractual basis. At the same time, it explains receptivity to annulment or extinguishment separate from the other contractual obligations. It is suggested that a payment or part-payment of the price in advance be considered to be a ‘provisional payment’ unless the parties indicate clearly that their intention is otherwise. Recognition of the provisionality of an advance payment enables the delivery of more sensitive justice. For example, in York Air Conditioning progress payments were made in advance under a contract to provide cold storage rooms on a cost plus 10 per cent profit basis. A claim was made for an apparent overpayment. At first instance, in response to the defendant’s argument that the payments were made voluntarily, the trial judge allowed recovery on the ground of mistake of fact. Dixon J upheld the award for failure of basis:

68 69 70 71

n 4 above, 75. n 20 above. (1949) 80 CLR 11 (HCA). Ibid, 63; cf also Fehlburg v Stanton (1960) ALR 299, 305 (HCA).

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Such a payment is prima facie to be considered provisional. When the liability has been ascertained the residue of the money lies in the payee’s hands unapplied for the purpose for which it was received, namely the discharge of the ultimate debt. Once it has been found to have been made provisionally and not finally, all difficulty disappears, in my opinion, and the balance can be recovered in an action of money had and received.72

Furthermore, in applying absence or failure of basis as the basal principle, the fact that the payee has carried out part performance of his promised obligation will not preclude the payer raising a prima facie claim in unjust enrichment. At the same time, more sensitive justice will be accorded to the payee through counter-restitution,73 and also, it is suggested, in some contexts, by way of a claim in an independent action, for example, a compensatory claim by way of equitable estoppel for losses incurred in reliance on the advance payment.74

IV

CONCLUSION

In Australia it is submitted that ample authority from which a basal principle of absence or failure of legal basis may be drawn, which founds a restitutionary claim in unjust enrichment, is set forth in Dixon J’s well-known judgment in Dennys Lascelles as clarified by his careful analysis in Automatic Fire Sprinklers. Insofar as the decision in Baltic Shipping relies on a constructive, contractual explanation, it should be disregarded, together with the English decisions of Hyundai Heavy Industries and the later Stocznia Gdanska, as not correctly declaring Australian common law.75 Some who have been resistant to the recognition of this single ground have argued that it is not readily understandable to the man on the Clapham omnibus, because it entails a legalistic explanation in order to understand it. Indeed, Birks himself has adverted to this feature.76 I am not able to accept such argument. The ‘unjust factors’ explanation, focusing on ‘no consent’, ‘vitiated consent’ and ‘qualified consent’ with the 72 York Air Conditioning and Refrigeration, n 66 above, 63–4 (emphasis added). A similar approach may provide a ready explanation for the English decision of DO Ferguson & Associates v Sohl (1992) 62 Build LR 95, 105 (CA). See discussion in P Birks, ‘Failure of Consideration’ in FD Rose, Consensus Ad Idem (London, Sweet & Maxwell, 1996) 179, 199–200. 73 Cf, eg Rawson v Hobbs (1961) 107 CLR 466, 484–5, 492–3 (HCA): David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 400 (HCA). 74 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (HCA). 75 These three decisions are better viewed as examples of express contractual regimes agreed to by the parties. See Lord Goff’s statement endorsing this approach as a general rule in Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 WLR 161,164, (HL), referred to by Gummow J in Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 [65] (HCA).

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leitmotif ‘I did not mean to give’,77 sells Everyman short. Everyman is a responsible, cognitive, autonomous human being who acts purposefully when he or she pays money, with the purpose of fulfilling a perceived liability or responsibility, or of some other purpose or end, for example, a gift. When according recognition to a workable rule governing the recovery of a payment of money, it strips the payment transaction of all meaning to disconnect it from the purpose which informs it.78 In Roxborough v Rothmans of Pall Mall Australia Ltd79 the High Court of Australia has stated that the concept ‘failure of consideration’ (for which, without straining, could be substituted ‘failure of basis’)80 embraces ‘payment for a purpose which has failed, as for example where a condition has not been fulfilled or a contemplated state of affairs has disappeared’. That broader articulated principle is capable of deciding, in a variety of circumstances involving money payments, failures of purposeful action. The principle is capable of workable application beyond Birks’s obligatory enrichments to non-obligatory enrichments. Finally, I do not understand the recognition of this single explanatory principle as constituting a new approach or scheme, as has been suggested. To my mind, the revelation from the decided cases of this elegant single explanatory ground, through, in the context of an advance contractual payment, the necessary additional step of according recognition to annulment of the advance provisional payment, represents an authentic, evolutionary development that is consonant with the genius of our common law system.

See Birks, n 2 above, 115. Cf P Birks and R Chambers, Restitution Research Resource (Oxford, Mansfield Press, 1997) §113. 78 See my earlier essay, PA Butler, ‘Mistaken Payments, Change of Position and Restitution’ in PD Finn (ed), Essays on Restitution (North Ryde, Law Book Co, 1990) 87, 113. Drawing on the purposefulness of transactions and adopting the earlier wider view of the term ‘consideration’ (see P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon, rev edn, 1989) 223), I suggested the basal principle of recovery in the context of mistaken payments to be ‘failure of consideration’, that is, ‘failure of the basis or condition on, or purpose for, which the payment was made’ (108–9, 131–2). 79 (2001) 208 CLR 516, [16], [104] (HCA), invoking the early wider concept of ‘consideration’: Birks, n 74 above, 223. The case concerned retailers, the plaintiffs–appellants, who bought tobacco products from a wholesaler for a price which included, as a separate item, an amount for a recurring monthly licence fee. It was the common intention of the parties that the wholesaler would pay the fees, when incurred, to the revenue authority, and that the retailer would ultimately pass on the fees to consumers. The fee was declared constitutionally invalid. A majority held that the retailers could recover from the wholesaler the severable tax portion of the price for failure of consideration. 80 See Birks, n 2 above, 123–4. 76 77

13 Mistaken Improvers and a Recognisable Law of Unjust Enrichment MI S TAKEN I MPROVERS AND UNJ US T ENRI CHMENT

STRUAN SCOTT* S TRUAN S COTT

I

T RI B UT E

I

WAS F O RTU N ATE to meet Peter Birks when he visited us at Otago. It was a memorable visit. I wish I had been able to meet with him on other occasions, but it was not to be. Rather, it was through his writings that I was able to receive the benefit of his insights into and depth of knowledge of our law. One of Peter’s many gifts was the ability to look beyond individual cases to discern insights into our law, if not discern theoretical structures which could explain the result and incorporate the case within a wider legal framework. In this essay I reflect upon some of the insights Peter offered us on a small and problematic area of the law—that of mistaken improvers of land—and how he saw it fitting within his theoretical structure for private law. I do not discuss the substantive requirements for these claims, nor whether notions of unjust enrichment can be used to expand relief.1 Rather, the focus is on the theoretical structure and the suggestion that the parties’ behaviour is (or should be) irrelevant for determining whether prima facie a cause of action within the law of unjust enrichment arises.

* Associate Professor of Law, University of Otago. I am grateful to Richard Sutton for his comments and suggestions on a draft of this paper. 1 See R Sutton, ‘What Should be Done for Mistaken Improvers?’ in P Finn (ed), Essays on Restitution (Sydney, The Law Book Company Ltd, 1990) ch 8.

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Few lawyers (but there have been some2) would disagree that (at the very least) notions of unjust enrichment provide at a ‘visceral level . . . an important catalyst to . . . legal inquiry’.3 There is something disturbing about a party obtaining an unintended gain at the expense of another. Despite (or perhaps because of) the considerable amount of thought which unjust enrichment has attracted, common law lawyers (even lawyers within the same jurisdiction) appear to be no closer to agreement as to the existence of a law of unjust enrichment or its attributes. Even its name is controversial.4 A cause of this is that lawyers analysing the cases see different things.5 For example, in the situation of services performed by one who thought they had (or would have) a valid contract with the recipient of those services, unjust enrichment competes with a range of other possible principles. These include a principle of unjust sacrifice6; a concern to ensure that there is fair compensation for services provided7; the application of extended notions of contract8; perhaps even notions of unconscionability.9 The list goes on. Indeed, in some situations some lawyers can discern a number of influences. Not surprisingly, disagreement continues when lawyers look beyond specific situations to see if they are analogous to other situations. We enter the debate as to whether unjust enrichment is a ‘“unifying legal concept” which explains why the law recognises an obligation to make restitution in particular contexts’.10 We

2 Classic judicial illustrations are Baylis v Bishop of London [1913] 1 Ch 127 (CA), 140 (‘that vague jurisprudence which is sometimes attractively styled “justice as between man and man”’ per Hamilton LJ) and Holt v Markham [1923] 1 KB 504 (CA), 513 (‘well-meaning sloppiness of thought’ per Scrutton LJ). 3 P Finn, ‘Equitable Doctrine and Discretion in Remedies’ in W Cornish et al (eds), Restitution Past, Present and Future (Oxford, Hart Publishing, 1998) 251. 4 P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn, 2005) xi (‘[W]e waste an unconscionable time wondering whether unjust enrichment exists and, if it does, what form it takes, and what its relationship might be to restitution.’). 5 Donoghue v Stevenson [1932] AC 562 (HL) is a classic illustration of this. See G Samuel, ‘Can the Common Law be Mapped?’ (2005) 55 University of Toronto Law Journal 271, 274. 6 S Stoljar, ‘Mistaken Improvement of Another’s Property’ (1980) 14 University of Western Australia Law Review 199; G Muir, ‘Unjust Sacrifice and the Officious Intervener’ in P Finn (ed), Essays on Restitution (Sydney, The Law Book Company Limited, 1990) ch 9. 7 Morning Star (St Lukes Garden Apartments) Limited v Canam Construction Limited (CA90/05, 8 August 2006, Glazebrook, O’Regan and Arnold JJ) (NZCA) paras [42]–[43]; R Grantham and C Rickett, Enrichment and Restitution in New Zealand (Oxford, Hart Publishing, 2000) ch 11. 8 S Hedley, Restitution: Its Division and Ordering (London, Sweet & Maxwell, 2001) chs 1–3. 9 Gummow J in Roxborough v Rothmans of Pall Mall Limited (2001) 208 CLR 516 (HCA). 10 Finn, n 3 above, 251.

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might also enter—though more often seek to avoid—the debate about the underlying justification for imposing such an obligation. Since the 1970s,11 Peter Birks contributed to our understanding of the law of unjust enrichment (or restitution as he then referred to it). But in the 1980s, with the publication of An Introduction to the Law of Restitution12 (hereafter ‘Introduction’), he provided a means to transform our understanding. This was through the ‘scheme’ (to use the Birksian term13) he advanced against which the existing examples of ‘restitutionary’ case law could be analysed, the law developed and then applied consistently. It has been said that through this scheme and associated rigorous definition of the underlying concepts,14 Birks sought to provide order from chaos.15 Before long, however, important aspects of this scheme, for example the use of ‘free acceptance’ as an ‘unjust factor’16 and the diverse range of topics coming within the law of restitution,17 were being questioned. Not surprisingly, so too was the scheme itself.18 The publication of Unjust Enrichment19—in turn the culmination of a number of articles20—was Birks’s response. Unjust Enrichment may be regarded as an evolution in Birksian theory. The basis of Introduction’s scheme (and most of the associated concepts such as subjective devaluation) remain.21 Nevertheless there have been developments. One development was to the scheme itself. A new stage directed at determining whether a successful claim should result in a personal or a 11 P Birks, ‘Negotiorum Gestio and the Common Law’ [1971] CLP 110; P Birks, ‘Restitution for Services’ [1974] CLP 13. 12 P Birks, An Introduction to the Law of Restitution (Oxford, Oxford University Press, 1989). 13 Ibid, 27. 14 An example is the Birksian concept of ‘subjective devaluation’: see ibid., 109–32. Subsequently, Birks expressly recognised the significance of a narrow theoretical conception of enrichment for the scope of the law of unjust enrichment: see P Birks, ‘Equity, Conscience and Unjust Enrichment’ (1999) 23 Melbourne University Law Review 1,13. 15 S Hedley, A Critical Introduction to Restitution (London, Butterworths, 2001) 10. 16 A Burrows, ‘Free Acceptance in the Law of Restitution’ (1988) 104 LQR 576. 17 Critics include IM Jackson, The Varieties of Restitution (Sydney, The Federation Press, 1998); and Hedley, Restitution, n 8 above, chs 1–3. There are also judicial critics: see, eg Gummow J in Roxborough v Rothmans of Pall Mall Limited (2001) 208 CLR 516 (HCA). 18 Hedley, Critical Introduction, n 15 above, 12–13. 19 Birks, Unjust Enrichment, n 4 above. 20 These include: ‘Definition and Division: A Mediation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon Press, 1997) ch 1; ‘Misnomer’ in Cornish et al (eds), n 3 above, ch 1; Birks, ‘Equity, Conscience and Unjust Enrichment’, n 14 above; ‘The Law of Restitution at the End of an Epoch’ (1999) 28 University of Western Australia Law Review 13; ‘Rights, Wrongs, and Remedies’ (2000) 20 Oxford Journal of Legal Studies 1; and ‘A Letter to America: The New Restatement of Restitution Vol 3’ [2003] Global Jurist Frontiers No 2, Article 2. 21 Birks had earlier modified aspects of the operation of ‘free acceptance’: see P Birks, ‘In Defence of Free Acceptance’ in A Burrows (ed), Essays in the Law of Restitution (Oxford, Clarendon Press, 1991) 105.

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proprietary right of recovery has been added.22 The result is a redeveloped three-stage scheme. The first stage is to determine whether there is a prima facie cause of action. This requires a court to determine: (i) if the defendant was enriched; (ii) if the enrichment was obtained at the plaintiff’s expense; and (iii) whether or not the defendant’s retention of the enrichment is unjust.23 Assuming there is a prima facie cause of action, as is noted above, the (new) second stage is to determine the nature of the resulting right. This leads to the third (and last) stage, to determine whether there is a defence. Birks placed considerable emphasis on this last stage. It is said that this is where ‘the fine tuning of the law of unjust enrichment’ occurs.24 A second development was the recognition of a theoretical structure for the ‘private law as a whole’.25 In brief, the theoretical structure sets the scene for allocating legal disputes to discrete categories. These determine how the claim is to be analysed. For claims coming within the unjust enrichment category, the (redeveloped) scheme provides the stages for that analysis.26 In turn, this analysis is influenced by the attributes Birks suggested an unjust enrichment claim has.27 This was a third development. The attributes themselves have been discerned from the case law, and from one case in particular—that of Kelly v Solari.28 Birks believed that Kelly v Solari (and the factual situation it involved—the ‘mistaken payment of a non-existent debt’29) was a ‘core case’30 for our understanding of an unjust enrichment claim. The cumulative result of these developments is said to be a more coherent law of unjust enrichment—a law which ‘does not change its shape from day to day’31 and can ‘be recognized by any eye’.32 Giving an unjust enrichment claim a recognisable nature is an admirable aim, but, as Lon Fuller and William Perdue Jr warned some 70 years ago, assuming or requiring ‘that every action . . . [has or] have a recognizable “nature”’ may be ‘the modern equivalent’ of the writ Birks, Unjust Enrichment, n 4 above, 39–40. Although not discussed in this paper, another development was the suggestion that the current list of unjust factors be replaced with an absence of basis test. ibid, chs 5–6. 24 Ibid, 40. 25 Ibid, 45. 26 Discussed in the text accompanying nn 79–88. 27 Discussed in the text accompanying nn 89–109. 28 (1841) 9 M & W 54 (Exchequer). 29 Birks, Unjust Enrichment, n 4 above, 3. 30 Ibid, 3–19. Kelly v Solari is one of the first cases Birks uses in Introduction to illustrate the point that there are ‘event[s] which . . . give rise to [a right to] restitution’ (Introduction, n 12 above, 9). 31 Birks, Unjust Enrichment, n 4 above, xi. 32 Ibid. 22 23

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system.33 Moreover, giving an unjust enrichment claim a recognisable nature requires one to exclude cases which do not correspond to that nature.34 This essay questions the assumption that all unjust enrichment claims are (or should be) similar. To illustrate this point, the essay compares two categories of cases. These are the ‘improver cases’ and the ‘almost contract cases’. These categories are similar in that they involve the improvement of another’s land, and as such raise similar judicial concerns. Yet, traditionally, they have been analysed differently.35

III

A

THE I MPROVER CASES AND T HE ALMOST CONTRACT CAS E S : OVE RV I E W

The Improver Cases

Typically the improver cases involve one party (the improver) spending money (and/or their time and effort) erecting (or repairing) a building36 on land (i) which they believe they own;37 (ii) in respect of which they have an expectation of occupation;38 or (iii) which they believe they are acquiring.39 In fact, the improver is mistaken and seeks relief against the owner. While it comes within the second subcategory, the well-know case of Hussey v Palmer40 is illustrative of improver cases. In this case, Mrs 33 ‘The Reliance Interest in Contract Damages’ (1936) 46 Yale Law Journal 52 and 373, 387. Their focus was the enforcement of contractual promises and they argued that when a court enforced a promise it was not necessarily ‘pursu[ing] only one purpose and protect[ing] one “interest”’ (at 66). Indeed, they went on to show how the ‘restitution’ and ‘reliance’ interests interacted depending upon the ‘scope given the concept “benefit”’(at 71). 34 When compared to the situations included within Introduction, the law of unjust enrichment has been slimmed down as Birks ‘pull[ed the law of unjust enrichment] . . . out of categories to which [he now considered] it d[id] not belong’’ (Birks, Unjust Enrichment, n 4 above, 45). 35 This may reflect the influence of Goff and Jones. There, the improver cases are considered under the heading ‘Restitutionary Claims Arising From Mistaken Improvement to Land’ (see ch 6, paras 6-002–6-006), while the almost contract cases are considered under the heading ‘Ineffective Transactions’ (see R Goff and G Jones, The Law of Restitution, G Jones ed (London, Sweet & Maxwell, 6th edn, 2000) chs 19–27). 36 The improvement may be to the soil as occurred in Estok v Heguy (1963) 40 DLR (2d) 88 (BCSC) (improving the soil’s fertility). 37 Dillwyn v Llewelyn (1862) 4 De G F & J 517 (CA in Chancery) (donee of an imperfect gift of land building a house on it). 38 Inwards v Baker [1965] 2 QB 29 (CA) (son building a house on his father’s land ‘under an expectation created or encouraged by the [father] that he w[ould] be able to remain there’: per Lord Denning MR at 36–7). 39 Ramsden v Dyson (1866) LR 1 HL 129 (HL) (defendant improving the plaintiff’s land in the belief that he would be granted a long lease of it). 40 [1972] 1 WLR 1286 (CA).

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Hussey, an elderly widow, provided funds to enlarge her son-in-law’s house so as to include an additional bedroom. This was to enable her to move in with the family. Despite the expectation that Mrs Hussey would live there indefinitely, about 15 months after moving in, differences arose and she acquired alternative accommodation. By a majority, the Court of Appeal held that Mrs Hussey had an interest in the house proportionate to the money she had contributed. Usually the improver seeks some form of proprietary interest, for example ownership of the improved land or a right of occupancy. But, as illustrated recently in Blue Haven Enterprises Ltd v Tully,41 the improver may also seek monetary relief based on the resulting enrichment of the owner. Improver cases have received a mixed reception from the courts attempting to resolve individual cases. But, following the approach of the Privy Council in Blue Haven Enterprises,42 it now seems settled that the availability of relief turns on the owner’s ‘unconscionable behaviour’43 (for example, some ‘representation, express or implied, . . . acquiescence or . . . encouragement’44) and, associated with this, whether the improver failed to heed an ‘appropriate warning’45 given by the owner (the improver’s carelessness). Prior to the publication of Unjust Enrichment, the English academic jury was out (so to speak) on whether the improver cases were ‘restitutionary’ in a ‘rights’ sense.46 Indeed, in Introduction, through his conception of enrichment,47 Birks attempted to lessen their overall significance for the law of unjust enrichment; he also questioned whether some of the cases coming within this category applied unjust enrichment [2006] UKPC 17 (PC). Ibid. See also Yeoman’s Row Management Ltd v Cobbe [2006] 1 WLR 2964 (CA). Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd (Note) [1982] QB 133, 151–152 (HC). Approved in Blue Haven Enterprises Ltd v Tully [2006] UKPC 17 (PC), para [24] (at para [23] suggesting it was also ‘implicitly approved’ in Attorney-General of Hong Kong v Humphrey’s Estate (Queen’s Gardens) Ltd [1987] AC 114, 123 PC). 44 Blue Haven Enterprises Ltd v Tully [2006] UKPC 17, para [24]. 45 [2006] UKPC 17, para [26]. 46 Compare Goff and Jones, n 35 above, paras 6-002–6-006 (including the doctrine of estoppel by acquiescence/proprietary estoppel) with G Virgo, The Principles of the Law of Restitution (Oxford, Clarendon Press, 1999) 552 (suggesting that ‘the restitutionary claim is founded on the defendant’s unconscionable conduct’ and as such are examples of restitution for a wrong), Burrows, n 16 above, 583–6 (suggesting that there are two concerns in the doctrine of acquiescence, one being ‘the active or passive engendering of reasonable expectations in the plaintiff and their fulfilment’ and the other being restitution) and A Burrows, The Law of Restitution (London, Butterworths, 2nd edn, 2002) 164–6 (questioning the decision by Goff and Jones, n 35 above, to classify this topic as restitutionary). 47 The ‘argument of subjective devaluation’ offers an explanation of why cases involving money transfers are by far the most numerous examples of unjust enrichment. And, in the process, inconvenient cases such as Falcke v Scottish Imperial Insurance Co (1886) 34 ChD 234 (CA) could be discounted. See Birks, Introduction, above n 12, 109–32. 41 42 43

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principles.48 This reaction to the improvers’ cases is not surprising. As Andrew Kull noted, since the courts ‘[a]cknowled[e] a role for fault’ the cases are ‘distinctive’ and ‘creat[e] a puzzle’ for restitutionary theorists.49

B The Almost Contract Cases These are a subset of cases involving an ‘ineffective transaction’.50 Typically, an ineffective transaction involves a party who mistakenly thought they had (or that they would have) a valid contract with another and, on that basis, supplied goods to or performed services for the other party, only to find that the contract is for some reason inoperative or was not entered into. Craven Ellis v Canons Ltd51 is the most well-known example. Sometimes the ‘contract’ involves the potential use of land (for example, architectural services, or the preparation of a development scheme).52 And occasionally, pursuant to the ‘contract’, the claimant performs services for the owner resulting in physical improvement to the land. These are ‘the almost contract cases’. Pavey and Matthews Pty Ltd v Paul53 is an example. In Pavey and Matthews the parties entered into an oral contract pursuant to which the appellant building company carried out building work on Paul’s premises. Once the work was completed Paul refused to pay the account, arguing that the contract was a building contract for the purposes of the Builders Licensing Act 1971 (NSW) and, as such, was unenforceable for want of writing. The High Court of Australia held that the building company could bring a quantum meruit claim for the value of the work it had carried out and the materials it had supplied. Alternatively, in an almost contract case the unenforceable ‘contract’ may be for the sale and purchase of land and, in reliance thereon, the 48 Ibid, 291 (contrasting those mistake cases which respond to the improver’s expectations with those which confer a right to restitution in that they respond to the owner’s free acceptance of the improvement). 49 A Kull, ‘Mistaken Improvements and the Restitution Calculus’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 369, 373. Kull also suggests that the courts consider notions of relative hardship. 50 This is the heading under which Goff and Jones, n 35 above, discuss these cases, see chs 19–27. 51 [1936] 2 KB 403 (CA). 52 William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932 (HC); Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 (NSWSC); Regalian Properties plc v London Docklands Development Corp [1995] 1 WLR 212 (HC). 53 (1987) 162 CLR 221 (HCA); Brewer Street Investments Ltd v Barclays Woollen Co Ltd [1954] 1 QB 428 (CA) (prospective lease; landlord commencing alterations for tenant who agreed to pay for them on completion; lease negotiations broke down and alterations not completed).

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purchaser improves the land. Van den Berg v Giles54 is an example. In this case, the plaintiff rented a house from Giles and spent a considerable sum of money on structural alterations and renovations to it. The plaintiff argued that he had spent this money in reliance on an oral agreement with Giles that she would sell the house to him. Giles denied that there was an agreement but conceded that she was aware of the work being carried out. The plaintiff was awarded damages reflecting the increase in the property’s value attributable to his work—which was less than the amount he had spent. In cases like these there is a factual overlap with the improver cases.55 Additionally, these categories share a judicial concern with the behaviour of the parties—indeed, this concern is present in the wider group of ineffective transactions involving cases where the parties are negotiating towards a contract. The point is that if the recipient warns the conferrer of the enrichment that a contract may not eventuate, but the conferrer still performs the services, the conferrer may be disentitled from relief. This point was stressed by the Privy Council in the ‘subject to contract’ case of A-G of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd.56 Alternatively, as was also recognised in Humphreys Estate, encouragement by the recipient (that a contract will eventuate) may outweigh otherwise objective evidence (such as a subject to contract clause) that a contract may not be concluded.57

C

The Statutory Cases

In many jurisdictions there is yet another group of improver-type claims. Factually they are similar to the improver cases but, rather than appealing 54 [1979] 2 New Zealand Law Reports 111 (HCNZ); Estok v Heguy (1963) 40 DLR (2d) 88 (BCSC) (purchaser in possession improving the soil’s fertility; agreement unenforceable for want of certainty). 55 Ramsden v Dyson (1866) LR 1 HL 129 (HL) illustrates this overlap. Yeoman’s Row Management Ltd v Cobbe [2006] 1 WLR 2964 (CA) offers a more recent example. There a property developer undertook work to obtain planning consent for a property on the understanding that on obtaining that consent he and the owner would enter into a legally binding contract for the sale of the premises to him. On obtaining the planning consent the owner refused to enter into the contract unless the purchase price was increased. The developer successfully argued that the doctrine of proprietary estoppel applied. 56 [1987] AC 114 (PC) (normally a plaintiff will not have a successful claim if he confers a benefit ‘in the hope that a voluntary agreement in principle expressly made “subject to contract” and therefore not binding would eventually be followed by the achievement of legal relationships in the form of grants and transfers of property’: per Lord Templeman at 127). 57 [1987] AC 114 (PC) (‘[I]t is possible but unlikely that in circumstances at present unforeseeable a party to negotiations set out in a document expressed to be “subject to contract” would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract, or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transaction envisaged by the document’: per Lord Templeman at 127).

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to the court’s equitable jurisdiction, the improver appeals to a statutory jurisdiction.58 These are the ‘statutory cases’. For the purposes of this essay our concern is with the improver cases and the almost contract cases. This is not to say that the statutory cases are unimportant—either as a source of relief or for restitutionary theory.59 They are important. Indeed, in jurisdictions where the statutory jurisdiction provides more available (or better) relief than under the improver case law, its existence may be seen as hindering the development of the common law principles. But as statutory creations—whether correctly or not—the influence of unjust enrichment principles can be too easily discounted.60

IV

THE I MPROVER CASES AND T HE ALMOST CONTRACT CAS E S : T H E I R CO M P L E X I T Y

The law of unjust enrichment is about imposing obligations.61 As a result, in a society which highlights the autonomy of the individual (as a result of which contract is the main way in which obligations are ‘assumed’, to use a value-laden term) and the courts assume that ‘freely bargained consensual transactions allocate resources more efficiently’ than they can,62 the very nature of an unjust enrichment claim is suspect. 58 In New Zealand, for example, ss 129 and 129A of the Property Law Act 1952 confer a discretionary jurisdiction upon the courts to grant relief to an improver in cases of (i) mistaken encroachment from their land onto a neighbour’s land and (ii) where a building (or other structure) has been mistakenly placed on another’s land. As from 1 January 2008 the Property Law Act 2007 repeals the 1952 Act and in ss 321–5 introduces a new statutory regime conferring a discretion upon the courts to provide relief for ‘wrongly placed structures’. In granting relief the court may have regard to ‘the extent to which any person has been unjustifiably enriched at the expense of the person seeking relief …’: s 324(1)(c). 59 In 1994, the New Zealand Law Commission recommended the repeal of the Property Law Act 1952 and the enactment of a new Property Law Act. The new Act would replace the current provisions dealing with improver cases (discussed at n 58 above) with a new sections dealing with ‘wrongly placed structures’. The Law Commission’s recommendations have now been incorporated in the Property Law Act (also discussed above). In recommending these changes, the Commission considered that the courts should have the jurisdiction to make orders for restitutionary relief: see New Zealand Law Commission, A New Property Law Act NZLCR 29 (Wellington: Government Printer, 1999), para 102. 60 R Grantham, ‘The Equitable Basis of the Law of Restitution’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Law Book, 2005) 349 (suggesting that the law of restitution is ‘largely uncorrupted by statutory intervention’). 61 Unjust Enrichment, 8–9 (‘the right to restitution . . . is not referable to any manifestation of consent on the part of the recipient. It does not depend on the recipient’s promising or in any sense agreeing to give up the enrichment. The law, endorsed as it would seem to be by the moral judgment of most of its subjects, imposes the obligation . . . Far from agreeing, the recipient often resists’). 62 D Rendleman, ‘Symposium: Restitution and Unjust Enrichment: Quantum Meruit for the Subcontractor: Has Restitution Jumped off Dawson’s Dock?’ (2001) 79 Texas Law Review 2055, 2067 (in turn referring to A Kull, ‘Restitution and Noncontractual Transfer’ (1997) 11 Journal of Contract Law 93, 93–7).

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Against this backdrop the almost contract cases attract a degree of suspicion while the improver cases attract even more suspicion, if not outright hostility.63 The material in this section briefly considers why the improver cases in particular and to a lesser degree the almost contract cases have attracted this response. As an overgeneralisation, the answer is that the courts are concerned about the potential prejudice to the recipient of a successful claim.64 Where an enrichment takes the form of a transfer of money, the risk of prejudice is less. If the money has not been spent, it is available for immediate return; and if it has been spent, a court can evaluate whether this should preclude relief. The risk of prejudice increases if one focuses on surviving wealth as opposed to the actual money received, as Birks suggested should be the position,65 but since money is our medium of exchange and nowadays largely takes an intangible form, the increase in potential prejudice is slight. Turning to the improver claims, at least three (sometimes interrelated) factors can be identified which increase the concern of prejudice. First, these claims involve land. Despite its increasing commodification, land continues to have a special status in English law. More importantly, the improver cases challenge one’s ownership of land. Traditionally, the improver seeks to deprive the owner of their ownership or an attribute of that ownership, for example, exclusive possession. Using Birksian terminology, the claim is an ‘active’66 one. If successful, the result is to impose a hardship on the owner. Perhaps reflecting this, common law’s first inclination is to protect the owner. Indeed, through the doctrine of fixtures, common law has determined that, where the improvement takes the form of fixing chattels (for example, building materials) to the land, the chattels lose their identity and become the land. Rather than viewing the improver favourably, common law regards the improver as a trespasser.67 Relief, if any, has had to come from the courts of Equity trying to moderate, where appropriate, the rigours of common law. Compared to this, the mistaken payer of a non-existent debt—Birks’s core case of unjust enrichment—is more mainstream in that the claim is recognised by common law. Moreover, 63 A classic example is the opening comments of Bowen LJ in Falcke v Scottish Imperial Insurance Co (1886) 34 ChD 234, 248 (CA) (‘work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditures’). See Goff and Jones, n 35 above, para 17-009 note 59 on the significance of the placing of the comma after the word ‘alone’. 64 Kull, n 49 above. 65 Unjust Enrichment, 6–7. 66 Birks, Introduction, n 12 above, 121–4. 67 Holland v Hodgson (1872) LR 7 CP 328 (Exchequer) provides the ‘classic statement’ of when accession to land occurs. In contrast, the law seems more favourable for improvers of chattels, see Sutton, n 1 above, 270–2.

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the potential hardship to the defendant is less as the payer is seeking merely the return of money which the recipient should never have received. It is tempting to assume that the improver claim becomes more attractive (in justifying the imposition of an obligation) if it is a monetary claim. Indeed, when the improver is seeking to offset the improvements against liability to the owner for, say, mense profits,68 an account of profits69 or even a counter-claim70—a ‘passive’ claim in which the improver is conceding the owner’s superior interest to the land—the courts, including the common law courts, are more sympathetic. But two other difficult issues remain which suggest that the imposition of the obligation (to pay a sum of money) may result in hardship or prejudice to the owner. The first of these involves the challenges in valuing the improvement. There are a number of aspects to this. Unlike money, which has a recognised objective value, improvements to land are hard to value. Typically, the cost of an improvement (the cost of building) is less than the resulting increase (if any) in the land’s value.71 In this situation a difficult question is whether the value of the improvement (the benefit to the owner) is its actual cost, the resulting increase in market value or something else. Moreover, unlike the almost contract cases, there may be no evidence to support an inference that the recipient valued the services leading to the improvement. In the improver case, even the owner’s subsequent use of the improvement may be unreliable.72 Indeed, it has been said that ‘the true benefit to the landowner from an unrequested improvement is ultimately unknowable’.73 To avoid any ‘possibility of prejudice to an innocent owner’ the judicial temptation is ‘to deny any relief to the improver’.74 Assuming the benefit can be valued, there is then the problem of ‘liquidity’. This is the last factor. If the land is not to be sold, the owner will need to find the money to restore the value of their enrichment to the improver. It has been said that

Earl Cawdor v Lewis (1835) 1 Y & C Ex 427 (Ct of Exchequer in Equity). Montreuil v Ontario Asphalt Co (1922) 63 SCR 401 (SCC). Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574 (SCC). Indeed, it has been said that ‘mistaken improvement[s] might serve as the archetype of the inefficient transfer’: Kull, n 49 above, 372. 72 As the court in Taylor v Laird (1856) 25 L J Ex 329, 332 (Exchequer) recognised, in many situations the use of an improvement cannot necessarily be distinguished from use of the underlying asset. 73 Kull, n 49 above, 370. 74 Ibid. 68 69 70 71

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Liquidity limits the availability of restitution because it is harder to require a defendant to take money out of his pocket than to deduct the same amount from the defendant’s share of money that is already on the table.75

And, of course, requiring the owner to sell their property undermines their ownership and, where the land is not merely an investment, may be seen as causing hardship.76 Against the backdrop of these challenges, it is not surprising that dicta in Blue Haven Enterprises Ltd v Tully77 suggest that, should an improver pursue a monetary claim, typically a similar requirement of unconscionable behaviour applies, albeit that in an ‘unusual’ case enrichment may suffice. Turning to the almost contract cases, it is tempting to distinguish them from the improver cases on the ground that the improver is seeking monetary relief as opposed to an interest in the land. Traditionally, when the improver cases were associated with proprietary relief there was some truth in this. But, as the preceding discussion has shown, even when an improver is seeking monetary relief the challenges of valuing the work/improvement and liquidity remain. What is true is that these challenges appear to be easier to overcome in an almost contract case. When there is no contract the circumstances surrounding the claim—the existence of an almost contract—appear to influence the courts and the theorists.78 The circumstances provide a context against which the courts can evaluate whether the defendant valued the services and was willing to pay for them. This makes the imposition of the obligation more palatable. To recap thus far, the improver cases are problematic for the law of unjust enrichment. When the owner is enriched the courts look directly to the parties’ behaviour to determine whether to grant relief. The material in the next section considers how Birks dealt with these cases. It starts with a brief review of the Birksian vision for the law.

75 Ibid, 373–4. Typically, liquidity is not an issue with the passive claims noted. This is because the improver’s claim does not result in the owner having to pay money—their claim against the improver is simply reduced. A notable exception is Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574 (SCC), but there the plaintiff was seeking to acquire ownership of the improved land. 76 American Law Institute, Restatement (Third) of Restitution and Unjust Enrichment (Tentative Drafts) (2000–06), §10 Comment (a). 77 [2006] UKPC 17 (PC), para [24] (Oliver J’s (from Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd (Note) [1982] QB 133 (HC), 151–2) ‘key that unlocks the door to the equitable remedy is unconscionable behaviour and although it might be difficult to fashion the key without a representation by the defendant it would not, in principle, necessarily be impossible to do so. Enrichment of A brought about by improvements to A’s property made by B otherwise than pursuant to some representation, express or implied, by acquiescence or by encouragement, for which A is responsible would not usually entitle B to an equitable remedy’). 78 This may explain the prominence give to the concept of ‘free acceptance’.

Mistaken Improvers and Unjust Enrichment V

A

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T H E B I R K S I A N VI S I O N

The Underlying Theoretical Structure

As noted earlier, the Birksian theoretical structure sets the scene for allocating legal disputes to discrete categories. One of its key aspects is the idea of a causative event. In brief, all private law rights—whether they be a right for the specific performance of a contract, a right for a remedy for the breach of a contract, a right to reverse an unjust enrichment, or any other right—are said to arise from one of four causative events, one of which is ‘unjust enrichment’. Accordingly, the law of unjust enrichment is ‘the law of [causative] events which create new rights to reverse what would otherwise be an unjust enrichment’.79 In the list of causative events the key division is between ‘not-wrongs’ and ‘wrongs’. Not-wrongs are comprised of three subcategories or events—‘manifestations of consent’ (contracts being the dominant example),80 unjust enrichment and ‘miscellaneous other events’.81 These ‘creat[e] . . . primary rights which are realizable as such’.82 So, for example, a mistaken payment of a non-existent debt creates a primary right to reverse the unjust enrichment.83 In contrast, a wrong is ‘any breach of a duty’.84 A common example is the infringement of a primary right.85 A key point in this theoretical structure is that the causative events are ‘analytically distinct’86 (albeit that on occasions ‘[t]wo causative events may lurk in one set of facts’—the so-called alternative analysis87). The inference is that each causative event has its own distinct justification in determining the nature of the resulting right.88 79 Birks, Unjust Enrichment, n 4 above, 52. (Birks concedes that this definition is not necessarily decisive. As he observed immediately after, ‘[t]here is noise on many boundaries, not least on this one’.) 80 This subcategory includes contracts, conveyances and wills: some trusts would also be included, see Birks, ‘Definition’, n 20 above, 32–3. 81 While expressing doubts about this, Birks recognised that this subcategory may include property rights: P Birks, ‘Rights, Wrongs, and Remedies’ (2000) 20 Oxford Journal of Legal Studies 1, 28–9. Responding to these doubts, Grantham and Rickett have suggested that property rights should be included within the scheme; see R Grantham and C Rickett, ‘Property Rights as a Legally Significant Event’ [2003] CLJ 717. 82 Birks, ibid, 27. 83 Ibid, 28. 84 Birks, ‘Misnomer’, n 20 above, 8. 85 Birks, ‘Rights, Wrongs, and Remedies’, above n 81, 25. The category of wrongs extends beyond infringements of a primary right to include acts which are seen as arising independently of any primary right (eg failure to take reasonable care). 86 Birks, ‘Misnomer’, n 20 above, 8. 87 Ibid, 17. 88 But see P Jaffey, ‘Classification and Unjust Enrichment’ (2004) 67 MLR 1012.

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Applying this theoretical structure to the law of unjust enrichment, the message is that unjust enrichment is a causative event. As such, it justifies the creation of rights which operate to reverse an enrichment. But, when determining a claim coming within the law of unjust enrichment, a court must analyse the claim as required by that causative event. This leads on to the attributes of an unjust enrichment claim.

B Attributes As was noted earlier, Birks suggests that Kelly v Solari89 (and the factual situation it deals with—the mistaken payment of a non-existent debt) is a ‘core case’90 for our understanding of an unjust enrichment claim. Moving from a theoretical conception to a case-focused one, the law of unjust enrichment becomes ‘the law of all events materially identical to the mistaken payment of a non-existent debt’.91 The inference is that the court’s approach in Kelly v Solari reveals the true ‘identity’92 or attributes of an unjust enrichment claim. Through this core case a vision of how unjust enrichment operates as a causative event on a case-by-case basis is advanced. Kelly v Solari is said to illustrate that, as a causative event, unjust enrichment is motivated by and responds to ‘very slight facts’.93 In essence, these are the swelling of the recipient’s assets (typically by the receipt of money) in circumstances where there is no explanatory basis for the swelling and ‘there is no contract and there is no wrong’.94 Moreover, the liability to restore remains ‘so long as the [recipient’s] assets, taken as a whole, remain swollen’;95 it is irrelevant whether ‘the actual money received’ remains.96 A claim which does not correspond to these attributes does not and cannot come within the law of unjust enrichment. Inherent in this message are the following three interrelated points. First, liability is strict. Indeed, strict liability is said to be the ‘only acceptable regime’ for the law of unjust enrichment.97 This attribute arises because the recipient’s prima facie obligation to restore enrichment—stage one in the Birksian scheme—as opposed to the amount of that obligation does not depend on any fault by them for the transaction.98 Indeed, 89 90 91 92 93 94 95 96 97 98

Above n 28. Birks, Unjust Enrichment, n 4 above, 3–19. Ibid, 3. Ibid, 45. Ibid, 7. Ibid. Ibid. Ibid, 6. Ibid, 7. Ibid, 5.

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recovery from an innocent recipient is ‘the essential nature of liability in unjust enrichment’.99 This is because ‘[i]t takes very slight facts to justify the relocation of an extant gain’.100 The contrast is with imposing or allocating upon a defendant liability for a loss. 101 Secondly, the plaintiff’s carelessness is also irrelevant for the imposition of the prima facie obligation.102 Finally, although the resulting liability is strict, it is ‘fragile’ as, save where the recipient is disqualified from advancing a disenrichment defence,103 liability depends on their assets remaining swollen.104 At this point, Birks acknowledges that the recipient’s behaviour becomes relevant. But he does not see this as inconsistent with his suggestion that the parties’ behaviour is irrelevant for the imposition of liability. Presumably this is because the consideration of defences occurs at stage three in the scheme, while the imposition of liability is an attribute of the stage one inquiry. Additionally, as is discussed in the next paragraph, there is a hint that a different causative event is at play. As we have seen, Birks equates the unjust enrichment causative event with the imposition of strict liability to make restitution ‘so long as the defendant’s assets . . . remain swollen’.105 When the swelling dissipates, the issue then becomes one of loss allocation. As a corollary of its focus on enrichment, the unjust enrichment causative event deals only indirectly with this—prima facie the ‘loss lies with the claimant’.106 To impose any loss on the defendant, the claimant has to show that the defendant dissipated the enrichment in ‘bad faith’107 or was otherwise a wrongdoer.108 Presumably this removes the case out of the unjust enrichment causative event and into another category of event, that is, wrongs.109

99 Ibid, 6. 100 Ibid, 7. 101 Ibid. (‘The

strict liability [imposed by the law of unjust enrichment] reflects th[e] difference between a defendant who is being asked to bear a loss and a defendant who is only being required to surrender a gain’.) 102 Ibid, 5. 103 Ibid, 209–15. 104 Ibid, 7–8. 105 Ibid, 8. 106 Ibid, 7–8. 107 Ibid, 218 (suggesting that bad faith should be restricted to objective dishonesty). 108 Ibid, 213. 109 While Birks stresses that the causative events are analytically distinct, he suggests that on occasions the application of one causative event to determine the rights of the parties may cease with another taking over. So, for example, in the context of tracing bribes he suggests that different causative events are said to explain the initial imposition of the trust as opposed to its extension to traceable gains: see P Birks, ‘Unjust Enrichment and Wrongful Enrichment’ (2001) 79 Texas Law Review 1767, 1775 note 29, 1785; P Birks, ‘Property and Unjust Enrichment: Categorical Truths’ [1997] New Zealand Law Reports 623, 661; P Birks (ed), English Private Law, Vol II, (Oxford, Oxford University Press, 2000) para 15.191.

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In Unjust Enrichment, the improver cases (as a class) are not directly analysed but, as will be apparent from the earlier review of these cases, they do not display the attributes which Birks suggests that an unjust enrichment claim should display. The case law proceeds on the basis that the parties’ behaviour is directly relevant to the granting of relief. The resulting inference is that the improver cases comprise a category of case that does not belong in the law of unjust enrichment. Presumably the causative event in an improver case is a miscellaneous one. This inference is strengthened by the fact that Birks reinterprets (at least) one formerly prominent example of an improver case, so as to retain it as an example of an unjust enrichment claim. This is Hussey v Palmer, the facts of which were noted earlier.110 Birks suggests that the case should be seen as involving a gift of money to fund the improvements (rather than involving the improvements themselves). Although a gift, Birks suggests that gifts, like any other transaction, can be qualified. Here, since the contribution was made on the basis ‘that she [Mrs Hussey] would live out her days in the son-in-law’s house’, the result was that when the arrangement broke down the basis for the payment failed.111 Further strengthening the inference that the improver cases are to be excluded is the approach taken by the courts in determining a claim. Rather than determining whether there is a prima facie cause of action and then considering whether there are ‘further facts which overwhelm the claimant’s prima facie entitlement to restitution’112 (stages one and three in the Birksian scheme), the courts appear to take an holistic approach. In contrast, once issues of enrichment are determined, most of the almost contract cases appear to be consistent with the Birksian vision for unjust enrichment cases; the exception are cases such as Sabemo Pty Ltd v North Sydney Municipal Council,113 in which the courts state that the recipient’s behaviour is relevant. Initially this conclusion may seem surprising since, as we have seen, the parties’ behaviour (conferring the services while warned by the recipient that a contract may not eventuate) is a relevant consideration in these cases. But the importance of this behaviour is recognised by Birks. He describes it as ‘risk-taking’.

See text accompanying n 40 above. Birks, Unjust Enrichment, n 4 above, 150. Ibid, 207. [1977] 2 NSWLR 880 (NSWSC) (the plaintiff ‘will be entitled to compensation or restitution if the other party unilaterally decides to abandon the project, not for any reason associated with bona fide disagreement concerning the terms of the contract to be entered into, but for reasons which, however valid, pertain only to his own position and do not relate at all to that of the other party’: per Sheppard J at 902–3). Distinguished in Regalian Properties plc v London Docklands Development Corp [1995] 1 WLR 212. 110 111 112 113

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A plaintiff is said to be a risk-taker when, in conferring the enrichment, they take the risk of getting nothing in return.114 The risk-taking qualification is regarded as being consistent with the vision that the parties’ behaviour is irrelevant for the imposition of liability. Presumably this is because Birks sees a distinction between carelessness and risk-taking, the difference being that risk-taking involves a knowing or intentional behaviour.115 Further, Birks downplays its relevance by confining its application to one question within stage one of his scheme and by focusing on successful claims. The reasoning is along these lines: To establish a prima facie cause of action the plaintiff must show inter alia that the defendant’s retention of the enrichment is unjust. The plaintiff will do so if he or she can show that the basis or reason for the enrichment failed. While a risk-taker may have desired to receive something in return for the defendant’s enrichment, he or she ‘intend[ed] a gift to those who chose not to’ oblige.116 Therefore, the basis for the enrichment did not fail, the enrichment is not unjust and there is no prima facie cause of action. Once risk-takers are excluded, one can argue that the plaintiff’s behaviour in conjunction with the enrichment is irrelevant in establishing a prima facie cause of action. Significantly, Birks also recognises that the recipient’s behaviour can negate the suggestion of risk-taking. He offers William Lacey (Hounslow) Ltd v Davis117 as an example. There the lowest tenderer for a building contract was led to believe that it would be awarded the contract. Subsequently, at the defendant developer’s request, it did extra work preparing calculations and estimates but no contract was entered into as the defendant sold the property. The court held that the builders were entitled to a quantum meruit for the additional work. Birks suggests that it was ‘an essential feature’ of that case that in the circumstances it was entirely reasonable for the builder to understand that the developer knew that the work which the builder was doing for him had gone far beyond [risk-taking hoping to obtain a contract] . . . and was being done on the basis that a contract would be made later.118

While this case involved preparatory work as opposed to improvements to land (and therefore it is not an almost contract case (as defined in this essay)), it is analogous. Given the similarities between the improver cases and the almost contract cases, the inference that one category of case comes within the law of unjust enrichment while the other does not seems puzzling. 114 115 116 117 118

Birks, Unjust Enrichment, n 4 above, 160. Ibid, 142. Ibid, 130. [1957] 1 WLR 932 (HC). See Birks, Unjust Enrichment, n 4 above, 143–4. Ibid, 144.

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A

E VA L UAT I N G T H E B I R K S I A N VI S I O N

An Elegant Theory

There is an elegance to the Birksian vision. Consider the following three aspects of it. First, through the idea of causative events, it offers (an apparently) comprehensive explanation for why and how the private law recognises rights. As such, it justifies the existence of a law of unjust enrichment (assuming, of course, that one accepts that unjust enrichment is a causative event). Moreover, the same explanation as applies to long-standing categories within the private law—for example, contract—applies to unjust enrichment (the particular causative event is just different). The subliminal message is that there is nothing unusual about unjust enrichment claims. Secondly, the idea that causative events are ‘analytically distinct’ provides a means of distancing the law of unjust enrichment from its (historically) uneasy relationship with contract.119 Birks states that in an unjust enrichment claim ‘there is no contract’.120 Additionally, it explains why the obligation to restore the enrichment is imposed, rather than consensual. And completing this list, since in an unjust enrichment claim ‘there is no wrong’,121 it removes the problematic122 topic of ‘restitution for wrongs’.123 This is a particularly elegant way of turning criticism of his earlier scheme (as contained in Introduction) into support for the recognition of a law of unjust enrichment. Birks has responded to critics by revealing why their (intuitive) criticism is after all consistent with his theoretical structure; a structure which, in turn, explains/justifies the existence of a law of unjust enrichment. In so doing, what was formerly 119 Ibid, 8–9 (discussing Kelly v Solari: ‘the right to restitution . . . is not referable to any manifestation of consent on the part of the recipient. It does not depend on the recipient’s promising or in any sense agreeing to give up the enrichment. The law, endorsed as it would seem to be by the moral judgment of most of its subjects, imposes the obligation to give it up. Far from agreeing, the recipient often resists’). 120 Ibid, 8. 121 Ibid. 122 Problematic in that it both required an extended meaning of ‘at the plaintiff’s expense’ and seemed to be dependent on the nature of the wrong. 123 In addition to responding to those who had criticised the (former) inclusion of the restitution for wrongs cases, another motivation for this point appears to be Birks’s concern with ‘discretionary remedialism’; the suggestion (or to use his words, the ‘nightmare trying to be a noble dream’) that courts have (or should have) a discretion to grant remedies as they consider appropriate: P Birks, ‘Rights, Wrongs, and Remedies’, above n 81, 23. In essence, Birks restricts a choice of remedy to the wrongs category. While a plurality of remedies might perhaps indicate a judicial discretion, Birks rejects the claim that this is an example of discretionary remedialism. The reason, he says, is that either the ‘choice is closed down by authority’ or it is ‘made by the plaintiff’: ibid, 33.

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criticism becomes, by implication, support for the existence of his conception of the law of unjust enrichment. Finally, there is Birks’s choice of the mistaken payment of a non-existent debt as the ‘core case’ from which the attributes of an unjust enrichment claim are revealed. Recovery in this situation is long recognised.124 So too is the association of recovery in this situation with unjust enrichment. Indeed, mistaken payments are said to be ‘the prototypical example of unjust enrichment’.125 Moreover, unjust enrichment (as explained by the Birksian theoretical structure) provides an attractive explanation for relief in this situation: the (presumed) relationship between the parties explains why the payment was made (and confirms that it was at the payer’s expense); the circumstances surrounding the payment confirm that there is in fact no basis for the payment; and there is widespread (if not universal) acceptance that the recipient is enriched.126 To the extent that the recipient remains enriched, the obligation to restore the enrichment seems appropriate. The elegance associated with the theoretical structure is important, for elegance itself is influential. Indeed, it has been said that elegant solutions ‘automatically carr[y] a degree of credibility’.127 The fact that the application of the theoretical structure and attributes remove the improver cases—a problematic area—from the law or unjust enrichment reinforces their attraction.

B Reservations Despite its elegance, the earlier comparison between the improver cases and the almost contract cases must raise some reservations about the Birksian vision, in particular the assumption that all unjust enrichment claims are (or should be) similar in the way in which the courts analyse them. As we have seen, the almost contract cases do appear to correspond with the Birksian vision that the parties’ behaviour is irrelevant for establishing a prima facie cause of action in unjust enrichment. Nevertheless the case law suggests that, as occurs with the improver cases, the courts dealing with an almost contract case regard the parties’ behaviour as relevant in determining the final result. The difference is the way in which the courts appear to deal with this. Kelly v Solari (1841) 9 M & W 54 (Exchequer). A Drassinower, ‘Unrequested Benefits in the Law of Unjust Enrichment’ (1998) 48 University of Toronto Law Journal 459, 459, 482. 126 Goff and Jones, n 35 above, 1-018; Birks, Introduction, n 12 above, 109. 127 R Goff, ‘The Search for Principle’ in W Swadling and G Jones (eds), The Search for Principle: Essays in Honour of Lord Goff of Chieveley (Oxford, Oxford University Press, 1999) 318 (discussing the ‘temptation of elegance’) 124 125

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An interesting aspect to the Birksian theory is its recognition that the courts do take into account the parties’ behaviour—Birks was too good a lawyer not to recognise this. But he considered it best to play down its significance. Thus, as we have seen, the judicial attention to the parties’ behaviour is recognised (and played down) through the risk-taking qualification. Additionally it is recognised in stage three of the scheme dealing with the availability of disenrichment defences. But again, as we have seen, its significance is played down by the inference that in this situation the courts are dealing with loss allocation and, as such, have moved beyond the unjust enrichment causative event (and the law of unjust enrichment) into another causative event. Returning to the risk-taking qualification, it is particularly interesting as potentially it (and the exception to it) provides a means of explaining the significance of the parties’ behaviour in the improver cases (and thereby bringing the cases back into the law of unjust enrichment). In brief, the key parts of the argument in favour of this are as follows. The law does not provide relief to risk-takers. For example, money is irrecoverable if it is ‘intentionally paid, without reference to the truth or falsehood of the fact’,128 that is, the reason for the payment. The fixture doctrine illustrates that as a matter of policy the courts seek to preserve the rights of owners of land as against improvers. Against the backdrop of this policy, anyone who improves land is deemed to be intentionally taking the risk that they will not benefit from the improvement unless they can point to a factor negating the inference that they did not take that risk. The owner’s unconscionable behaviour is such a factor; it operates to show that the improver was not a risk-taker. While Birks chose to play down the relevance of the parties’ behaviour, other theorists have openly recognised its significance. For example, Abraham Drassinower sees the attention expressly given to fault in the improver cases as express judicial recognition of the need for ‘bilaterality’.129 On this view, the law of unjust enrichment is responding Kelly v Solari (1841) 9 M & W 54; 152 ER 24, 59; 26. This concept was recognised and applied by the Ontario Court of Appeal in Campbell v Campbell (1999) 173 DLR (4th) 270. This case involved improvements to a family dairy farm business operated by a mother and her sons. The mother owned the land and equipment, and the sons owned the dairy quota. The mother became incapacitated and effectively the sons ran the business. They carried out improvements to the farm (funded from farm income). The sons then decided to sell their quota and sought to recover from their mother the value of the improvements. In denying the claim, Borins JA observed (at para [37]): 128 129

‘Simply stated, this is a case where the evidence shows that [the sons] . . . constructed the barn, and otherwise improved the farm property, without the consent of their mother who was the owner of the farm property, and subsequently, expected that she would reimburse them for having done so. However, there was no evidence that when they incurred these expenses, . . . [the sons] expected to be reimbursed by their mother. Moreover, even if the sons had such an expectation, there is no evidence that their mother accepted the improvements in circumstances in which she knew, or reasonably ought to have known, of her son’s

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not just to a transfer without cause but to one in which there is also evidence that the defendant recognised that the plaintiff was not intending to make a gift to him or her.130 Drassinower suggests that in the context of a mistaken payment of a non-existent debt—the Birksian core case—the court considers the requirement of bilaterality through the good faith requirement of the change of position defence.131 The suggestion is that, while the nature of the claim may change the way in which a court considers the defendant’s behaviour/knowledge, it is still relevant. Another theorist, Andrew Kull, attributes even more significance to the fact that in the improver cases the courts ‘[a]cknowled[e] a role for fault’.132 Indeed, he suggests that the cases ‘give rise to some of the most revealing real-life restitution claims in respect of non-money benefits’ and provide an insight into the ‘fundamental question of what “restitution” is all about’.133 Kull’s research suggests that the law is not merely about imposing obligations to pay for ‘benefit[s] received’ but also about ‘allocat[ing] a loss’.134 So why did Birks play down the significance of fault and attempt to remove the problematic improver cases from the law of unjust enrichment? I suggest that it is to do with his aim of showing that the law of unjust enrichment has a recognisable nature. As we have seen, his elegant theory is directed to that end.

VII

CONCLUSION

Currently the improver cases are problematic for the (English) law of unjust enrichment. This may be because they have been misclassified as unjust enrichment cases. Alternatively, the improver cases may be problematic because, when compared with claims to recover mistaken payments, they raise inherently more difficult issues, as a result of which the courts are more reluctant to impose an obligation and/or they consider a greater range of factors. If so, the courts’ treatment of mistaken payments may be misleading if they are used as the template for our understanding of the law of unjust enrichment. This essay suggests that the improver cases expectations. Indeed, there was evidence that she did not agree to the construction of a new barn. Thus, the evidence failed to show an absence of donative intent of the sons’ part which was as real from their mother’s perspective as it was from their perspective. Applying the concept of bilaterality, the plaintiffs failed to show that their mother was aware they were not making her a gift of the barn and the other improvements. Drassinower, n 125 above. Ibid, 486. Kull, n 49 above, 373. Kull also suggests that the courts also consider notions of relative hardship. 133 Ibid, 369. 134 Ibid, 372–3. 130 131 132

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share some similarities with the almost contract cases and with the Birksian core case. In all situations the behaviour of the parties may be relevant for the final outcome albeit that, depending on the type of claim, the courts consider that behaviour in different ways. The result is to question aspects of the Birksian vision for the law of unjust enrichment. This is not to play down Birks’s contribution to our understanding of the law, nor the insights offered by Unjust Enrichment. Indeed, as we have seen, he recognised that there is a broader theory which could accommodate some of the differences in the cases. Nonetheless he decided it was best to relegate that theory to a vision which seeks a greater degree of uniformity in the way courts deal with particular cases. This essay simply suggests that the Birksian vision focuses too much on certainty. ‘[T]he law’, it is said, ‘has to reflect life in all its untidy complexity.’135 So also should the theory purporting to explain the law. Through Peter Birks’s endeavours and insights we do have a better understanding of the law of unjust enrichment. The question he has left us to ponder is the degree of uniformity which the law of unjust enrichment requires and/or is capable of achieving.136

Goff, n 127 above, 318. No less a figure than Lord Goff has suggested that ‘[t]he principle of unjust enrichment cannot beget in restitution the extraordinary unity of principle that we find in [other areas of the law, ie] the law of contract’: ibid., 324–5. 135 136

14 Understanding Policy-motivated Unjust Factors UNDERS TANDI NG POLI CY- MOTI VATED UNJ US T FACTORS

SIMONE DEGELING * S I MONE DEGELI NG

I

FIR S T MET Peter Birks in 1990, when I arrived at University College London to pursue my LLM degree. In the last year of my undergraduate education at the University of New South Wales one of my equity lecturers1 had mentioned a radical and fascinating new book, An Introduction to the Law of Restitution, written by Birks, and I was keen to enrol on his course. I soon found that the law of restitution was to occupy more time than all of my other subjects put together; it was all consuming. The classes were electric, the material highly stimulating and Peter the most brilliant, inspiring and enthusiastic teacher I had ever encountered, before or since. Five years later Peter supervised my doctoral thesis with his usual patience and generosity. Draft chapters would be returned with his thoughtful comments, and I would spend hours working through the insights they offered. I have since come to realise just how exceptional Peter was as a supervisor. Few students receive such care and attention, or have the benefit of a supervisor who cares as much about the research project as the student. My doctoral research concerned three party cases which lie at the boundary between tort and unjust enrichment. It sought to explain why a stranger to litigation should ever be permitted to participate in the fruits of that litigation. In answering this question, I advanced the argument that the stranger’s right to participate is given to reverse the unjust enrichment of the plaintiff which would otherwise remain; in other words, to ensure that the plaintiff has not accumulated value. This analysis relied on a policy or family of policy-motivated unjust factors, called the policy * Associate Professor of Law, University of New South Wales. I am grateful to Angus Corbett, James Edelman, Arthur Glass and Robert Stevens for discussing some of the ideas in this essay with me. 1 Margaret Stone, now Justice Stone of the Federal Court of Australia.

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against accumulation. So began my interest in policy-motivated unjust factors.2 One of the most distinctive and important contributions of Birks’s work was his relentless and scholarly pursuit of an orderly and rational legal architecture. As he emphasised in his preface to English Private Law3: There is no body of knowable data which can subsist as a jumble of mismatched categories. The search for order is indistinguishable from the search for knowledge.

The taxonomy developed by Birks sought to place private law phenomena, including unjust enrichment, within a principled framework. A key component of this framework was his labelling and systematisation of the unjust factors or reasons for restitution pursuant to which the claimant must show a positive reason why the enrichment is unjust according to one of a typology of reasons or unjust factors.4 Leaving to one side for the moment recent developments arising out of the swaps cases,5 Birks ultimately identified two families of unjust factors.6 The first gives restitution because the claimant’s intention to transfer wealth is deficient in some way, either because of an impaired intention to transfer wealth, as in mistaken transfers or those produced under illegitimate pressure, or because the intention to transfer wealth is qualified.7 The second family of unjust factors are the so-called policy-motivated unjust factors. These are reasons for restitution which exist without reference to whether the claimant’s intention was vitiated or qualified. Rather, restitution is given for reasons of legal policy. Examples include the need to provide relief for those who confer benefits in an emergency, 2 S Degeling, Restitutionary Rights to Share in Damages (Cambridge, Cambridge University Press, 2003). 3 P Birks (ed), English Private Law, vol 1 (Oxford, Oxford University Press, 2000) xxxi–xxxii. 4 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, revised edn, 1989). The unjust factors have been developed by scholars and adopted in judicial decisions: see Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202, 206 (CA); Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221, 227 and 234 (HL); Niru Battery Manufacturing Co v Milestone Trading Ltd (No 2) [2004] 2 All ER Comm 289, 298 and 301 (CA); David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 379 (HCA); Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285, 301–2 (FCA); Wasada Pty Limited v State Rail Authority of New South Wales (No 2) [2003] NSWCA 987, [16]. 5 Kleinwort Benson Ltd v Sandwell Borough Council [1994] 1 WLR 938 (HC); Guinness Mahon & Co Ltd v Kensington and Chelsea Royal London Borough Council [1999] QB 215 (CA), which gave rise to the absence of juristic reasons approach advocated by Birks: P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn, 2005). 6 In the original Birksian scheme there was a third category: the defendant-sided unjust factors. Virgo gives some role to the conduct of the defendant in classifying the unjust factors: G Virgo, The Principles of the Law of Restitution (Oxford, Oxford University Press, 2nd edn, 2006) 120–4. 7 P Birks and C Mitchell, ‘Unjust Enrichment’ in P Birks (ed), English Private Law, vol 2 (Oxford, Oxford University Press, 2000) ch 15.

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sometimes described as the doctrine of necessity, and the claim available to those who pay money to a public authority when it is not due.8 The Birksian taxonomy is intended to be useful, to ensure that like cases are treated alike, to provide a ‘better grip on the structure of principle which holds the . . . precedents together’.9 It has, of course, proved to be all of this, but much more. The taxonomy has become the indispensable way the law can understand itself. This essay deals with a potential instability in the unjust enrichment part of the Birksian map, which arguably threatens the long-term utility of the unjust enrichment category as currently understood. Specifically, the discussion examines policy-motivated unjust factors. It investigates the proposition that these factors are systematically unstable. Arguably, the integrity of the whole unjust enrichment model is in jeopardy because it is not possible to identify an internal order and coherence to policy-motivated unjust factors. The fact that the identification of the relevant policies is external to the unjust enrichment model entails additional risks, namely that the set of available policies seems never ending and there are no criteria available to tell us which polices are recognised in unjust enrichment law. However, this essay ultimately concludes that this risk is overstated. It will be argued that it is necessary to view the policy-motivated claims as part of an entire system. In virtue of the fact that the legal policy underlying policy-motivated unjust factors is evidenced and expressed in other departments of the law, it will be seen that these factors are not ‘at large’. Although it may not be possible to theorise, beyond a high level of generality, that they are reasons for restitution mandated by specific legal policies, it is the fact that these policies are also located in other parts of the legal map that provide some degree of certainty. More importantly, taking the system-wide view allows the observation that it is not possible to construct a filter to determine which policies are protected in unjust enrichment. It will be argued that at the higher level of the system of law, policy-motivated unjust factors appear less destabilising. This essay will proceed in three parts. First, there is a brief description of the two key policy-motivated unjust factors described above, being necessity and claims against public authorities in respect of payments made pursuant to ultra vires demands. Secondly, the discussion will demonstrate the instability within the policy-motivated category, showing that the instability exists at various levels of analysis. Finally, the discussion will suggest various solutions to the problem.

8 9

Woolwich Equitable Building Society v IRC [1993] AC 70 (HL). Birks, n 3 above, xxix.

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PO L I CY M OT I VAT E D U N J U S T FAC TO RS

As a way of laying a foundation for the discussion in the remainder of essay, two policy-motivated unjust factors will briefly be outlined: (i) specific ground which gives restitution from public authorities payments made to the authority pursuant to an ultra vires demand, so-called Woolwich unjust factor; and (ii) benefits conferred in emergency/necessity.

the the for the an

A Payments to Public Authorities Made Pursuant to an Ultra Vires Demand In Woolwich Equitable Building Society v IRC,10 the House of Lords recognised a policy-motivated unjust factor such that: money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority is prima facie recoverable by the citizen as of right.11

Woolwich Building Society had been assessed for tax pursuant to regulations which were subsequently determined to be ultra vires and void,12 the effect of which was to render the demand for tax invalid. Woolwich sought, therefore, to recover some £57 million it had paid under protest to the Inland Revenue (the ‘Revenue’) on account of tax not actually due. The Revenue agreed to refund this money to Woolwich on an ex gratia basis, but in dispute was whether interest would be paid for the period when, in effect, the Revenue had had a ‘massive interest free loan as the fruit of its unlawful action’.13 Woolwich sued to recover £6.73 million as interest. The ability of Woolwich to succeed in claiming this interest depended on the recoverability of the principal sum in unjust enrichment.14 The difficulty Woolwich faced in making the claim was that it appeared that none of the accepted unjust factors applied.15 Woolwich could not argue mistake because it had all along disputed the validity of the regulations, even before they came into force.16 Equally, Woolwich could not be said to have paid under compulsion (duress), since ‘the possibility of distraint by the n 8 above. Ibid, 106, 177, 201 and 204. R v IRC, ex parte Woolwich Equitable Building Society [1990] 1 WLR 1400 (HL). Woolwich, n 8 above, 172. Supreme Court Act 1981, s 35A (UK). Woolwich, n 8 above, 173. Ibid, 104. The case was of course heard before the lifting of the mistake of law bar by the House of Lords in Kleinwort Benson v Lincoln City Council [1999] 2 AC 349, but in any event Woolwich made no mistake of law. 10 11 12 13 14 15 16

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revenue was very remote’.17 There was no evidence that the Revenue had made illegitimate threats in order to extract payment by Woolwich. The only implied threat was that of legal action in the event that the tax was not paid.18 Another reason for restitution had to be found. Undeterred by a submission by counsel for the Revenue that to extend the law would constitute judicial legislation, overstepping the boundary encompassing the legitimate development of the law by the judiciary,19 Lord Goff identified a unique unjust factor capable of supporting Woolwich’s claim, holding that: money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority is prima facie recoverable by the citizen as of right.20

In reaching this conclusion, Lord Goff was influenced by a variety of reasons. Of relevance to this analysis are the particular policy grounds identified by Lord Goff in support of the right to restitution that he articulated:21 the retention by the state of taxes unlawfully exacted is particularly obnoxious, because it is one of the most fundamental principles of our law—enshrined in a famous constitutional document, the Bill of Rights 1688—that taxes should not be levied without the authority of Parliament; and full effect can only be given to that principle if the return of taxes exacted under an unlawful demand can be enforced as a matter right . . . when the revenue makes a demand for tax, that demand is implicitly backed by the coercive powers of the state and may well entail (as in the present case) unpleasant economic and social consequences if the taxpayer does not pay.

Since Woolwich was decided, the relationship between the policy-motivated unjust factor and a possible claim by the taxpayer pursuant to the now liberated mistake of law claim has come under close scrutiny. The House of Lords overturned the Court of Appeal’s view in Deutsche Morgan Grenfell Group plc v IRC22 that mistake of law does not apply to taxes paid by mistake of law, but that such claims are said to be governed by statute or are recoverable pursuant to the Woolwich principle. Rather, the House of Ibid, 173. See the discussion of the implied threat when the party demanding is the state: ibid, 172 (per Lord Goff referring to the judgment of Holmes J in Atchison, Topeka & Santa Fe Railway Co v O’Connor 22 US 280, 285–6 (1911)). 19 Ibid. Lord Goff made the point that to accept that the proper boundaries of judicial action were as submitted, ‘a number of leading cases in your Lordships’ House [citing Donoghue v Stevenson] would never have been decided the way they were’. 20 Ibid, 177. 21 Ibid, 172. 22 [2006] Ch 243. See A Burrows, ‘Restitution in Respect of Mistakenly Paid Tax’ (2005) 121 LQR 540; R Williams, ‘The Beginnings of a Public Law of Unjust Enrichment’ [2005] Kings College Law Journal 194; R Stevens, ‘Justified Enrichment’ (2005) Oxf Univ Commonwealth Law Journal 141. 17 18

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Lords has now confirmed that claimants are not restricted to the Woolwich claim, but may rely on any alternate ground which may be available, such as mistake.23 The impact of Deutsche Morgan is therefore to reinforce the existence of the Woolwich policy-motivated unjust factor. There is no hierarchy of unjust factors.

B Benefits Conferred in an Emergency/Necessity Although the general position is that the law is hostile to the position of interveners,24 scholars have identified the features of a policy-motivated claim in unjust enrichment, said to encourage people to intervene in order to protect the health or property of another.25 A successful claim pursuant to this unjust factor gives restitution in the form of the reimbursement of expenses and possibly also remuneration for time spent in conferring a benefit on the defendant. The case for the existence of a generalised right to recover is built on the foundation of those pockets of cases which give the intervenor a right to recover. What follows is a thumbnail sketch of a voluminous body of law and commentary. One relevant pocket of cases is burial cases, in which a person who buries a body that it is the (moral, if not legal) responsibility of another to bury may claim the reasonable costs of burial from the party responsible.26 Cases on agency of necessity are also important. Pursuant to these cases, the roots of which lie in an agency of necessity of goods carried by sea or land,27 the intervener is entitled to be reimbursed for the expenses incurred in saving the principal’s property. The crucial elements seem to be that there must be a commercial necessity for intervention, it must be impossible to obtain the principal’s (defendant’s) instructions, usually because communication or at least proper communication is not possible, and the intervener must be acting bona fide in the interests of the principal.28 Salvage cases also form part of the evidence in support of the unjust factor, at least to the extent that they give reimbursement and Deutsche Morgan Grenfell Group plc v IRC [2006] 3 WLR 781 (HL). Nicholson v Chapman (1793) 2 Hy Bl 254 (CP); Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 (CA). 25 A Burrows., The Law of Restitution (London, Butterworths, 2nd edn, 2002) ch 9; Birks and Mitchell, n 7 above, 580–3; F Rose, ‘Restitution for the Rescuer’ (1989) 9 Oxford Journal of Legal Studies 167. For a discussion of the normative basis of the intervener’s claim, see H Dagan, ‘In Defense of the Good Samaritan’ (1999) 97 Michigan Law Review 1152. For a more restricted view, see J Dawson, ‘Rewards for the Rescue of Human Life’ in J Ratcliffe (ed), The Good Samaritan and the Law (New York, Anchor Books, 1966) ch 4. See also J Kortmann, Altruism in Private Law (Oxford, Oxford University Press, 2005). 26 Jenkins v Tucker (1788) 1 Hy Bl 90 (CP); Rogers v Price (1829) 3 Y & J 28 (Exch Plea). 27 The Winson [1982] AC 939 (HL); Great Northern Railway Co v Swaffield (1874) LR 9 Ex 132 (Exchequer). 28 Prager v Blatspiel, Stamp and Heacock Ltd [1924] 1 KB 566 (KB). 23 24

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remuneration.29 In furtherance of the law’s policy of encouraging rescue or salvage of persons or property30 in danger, the law allows a salvage award to a person who successfully intervenes, assuming that there is no pre-existing duty or obligation to do so. Extrapolating beyond these limited categories which give recovery to the intervener, the elements of the general claim in necessity are identified as follows:31 (i) there must be imminent likely harm to a person or property;32 and (ii) the intervener must be a suitable person to intervene.33 Other elements are more controversial: for example, Birks and Mitchell emphasise that it must have been impracticable for the claimant to communicate with the party assisted.34

II

D E M O N S T R AT I N G T H E I N S TA B I L I T Y

The instability in policy-motivated unjust factors exists at various levels of analysis. Three will be considered here: (i) the dominant unjust enrichment model; (ii) the Birksian ‘lack of sufficient explanatory basis’ model; and (iii) the corrective justice model. Each will be considered in turn.

A

The Dominant Unjust Enrichment Model

The dominant model for liability in Anglo-Australian law is that which demands an unjust factor, a positive reason for restitution. Assuming that the other elements in the liability equation are established, the ‘unjust’ in unjust enrichment is satisfied by pleading one of the recognised unjust factors. Even Gummow J, a well-known unjust enrichment sceptic, has spoken, in the context of pleading a claim in unjust enrichment, of 29 The availability of a reward measure in salvage cases creates difficulty, reward being a measure that is over and above restitution. Professor Burrows suggests that the future development of the law should be in a way to allow consistency between the salvage and non-salvage necessity cases, either by extending reward to non-salvage cases or cutting it off from the salvage cases. Burrows, n 25 above, 320–1. 30 Historically, for ships on the high seas, but now extended by statute to include life (Merchant Shipping Act 1995 (UK)), aircraft (Civil Aviation Act 1982 (UK)) and ships in UK tidal waters. Salvage in non-tidal waters (The Goring [1988] AC 831 (HL)) and on land (The Tojo Maru [1972] AC 242 (HL)) is excluded. 31 For a rare example in which the court has relied on a more general principle of necessity to justify the remuneration of an intervener in a category beyond the traditional examples, see Mollgaard v ARCIC [1999] 3 New Zealand Law Reports 735 (HCNZ). 32 Burrows, n 25 above, 316; Birks and Mitchell, n 7 above, 582–3. 33 Ibid. 34 Birks and Mitchell, ibid, 582.

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well established and recognised claims . . . [that] are concerned with recovery of benefits which are conferred not voluntarily and by virtue of mistake, compulsion and total failure of consideration.35

More recently, in Spangaro,36 Finkelstein J stated that, to obtain restitutionary relief, a claimant must demonstrate that ‘the enrichment was unjust (according to defined categories developed in the cases)’. Later, he made the point that a determination of unjust is not to be determined ‘by reference to some subjective evaluation of what is fair or unconscionable’ . . . Instead, one must turn to the recognised categories of unjust enrichment to identify the basis for the obligation to make restitution.37

In more modern language, we would identify this requirement as the need to demonstrate the presence of an unjust factor. As explained by Campbell J in Wasada Pty Ltd v State Rail Authority of New South Wales (No 2)38: But to the extent that these have been developed they may be termed ‘unjust factors’. ‘Unjust’ is the ‘generalisation of all the factors which the law recognises as calling for restitution’.

Similarly, in English law, there is strong evidence of the acceptance of the need for an unjust factor. For example, in Portman Building Society,39 Millett LJ emphasised the requirement for the claimant in that case to demonstrate that the enrichment is unjust and then went on to state that: There are several factors which make it unjust for a defendant to retain the benefit of his enrichment; mistake is one of them.40

The unjust factors are separated into those which are a function of the plaintiff’s deficient intention to transfer wealth (either vitiated or qualified intention) and policy-motivated unjust factors. In the deficient intention category of unjust factor we have an internal order which is relatively stable and internally consistent. We have modelled onto deficiencies of intention the various degrees of impairment supporting the claimant’s assertion that ‘I did not mean [the defendant] to have it’41 so that, pursuant to vitiated intention, we recognise unjust factors such as, for example, 35 Winterton Construction Pty Ltd v Hambros Australia and Another (1991) 101 ALR 363 (FCA). 36 n 4 above. 37 Ibid, 300 and 301. 38 [2003] NSWSC 987, [16] citing K Mason and J Carter, Restitution Law in Australia (Sydney, Butterworths, 1995) [227]. 39 n 4 above, 206–7. 40 Ibid, 206. For a recent example of unjust factor reasoning, see Deutsche Morgan Grenfell, n 22 above, 329. 41 Birks, n 4 above, ch 6.

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mistake42 and illegitimate pressure,43 and, pursuant to qualified intention, we recognise, for example, failure of basis.44 The same internal coherence cannot be attributed to the policy-motivated category. The unifying feature of policy-motivated unjust factors is that each is a reason for restitution which is mandated by a specific legal policy, where the reason for restitution is not a function of deficiencies in the plaintiff’s intention to transfer wealth, whether vitiated or qualified. The policy-motivated category operates as a default, supplementary or residual category.45 We can be tolerably sure that nothing relegated to the policy-motivated category belongs in the deficient intention category since the microscope has been carefully applied. For example, it is possible to identify unjust factors which initially were thought to be a function of vitiated intention but which have now been located within policy-motivated claims (for example, moral compulsion in which an intervener is morally compelled to intervene and assist in a situation of emergency). The primary proponent of moral compulsion was Birks, who argued that, by analogy with benefits given under duress, the services rendered by an intervener under moral compulsion may be the subject of an unjust enrichment claim.46 The alignment with duress was made through the medium of ‘compulsion’, the notion that the plaintiff’s intention to transfer a benefit to the defendant is vitiated by some type of pressure. In the case of duress, there is a claim in unjust enrichment if the plaintiff is compelled by illegitimate pressure to benefit the defendant. In the same way, Birks argued that the intervener’s will is constrained by the situation of the defendant, so that the intervener is morally compelled to act. However, moral compulsion came under fatal attack as an unjust factor.47 Burrows emphasised that if it is moral compulsion which is driving the plaintiff to intervene, he should not expect the law to provide a remedy.48 In addition, it could not satisfactorily explain all of the cases said to form part of the set. For example, the case of maritime salvage is treated differently under the heading of policy-motivated claims. In these 42 David Securities, n 4 above; Barclays Bank Ltd v WJ Simms, Son and Cooke (Southern) Ltd [1980] QB 677 (HC); Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (HL). 43 Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 (NSWCA); CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 (CA). 44 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (HCA). 45 Birks, n 5 above, 43 and 106. 46 Birks, n 4 above, 193–202. 47 Although Virgo does list necessity as a policy-motivated unjust factor rather than as a sided unjust factor, and relates it to the policy of encouraging interventions (at 124), he also justifies the unjust factor by reference to the effect of the emergency on the plaintiff’s free choice so that ‘the claimant’s freedom of choice was constrained by the circumstances facing the defendant so that there was no real choice open to the claimant but to intervene’: Virgo, n 6 above, 286–7. This latter analysis looks very like moral compulsion or, as Virgo would say, pressure. 48 Burrows, n 25 above, 314–15.

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cases the motivations of the interveners are somewhat less than altruistic. Salvors do not intervene because they are morally compelled, but because it is worth their while. The amount awarded to the salvor comprises three elements: remuneration for work done, reimbursement for costs incurred and a reward element to encourage salvage at sea. The reward element is inconsistent with an approach which seeks to reverse an enrichment of the defendant recipient of salvage services.49 In addition, as Burrows points out, even if we could sensibly separate maritime salvage from the rest, moral compulsion also fails to account for other cases.50 Birks and Mitchell subsequently conceded this ground, agreeing that certain benefits conferred in an emergency, to the extent that the remedy given is restitution and not reimbursement, could form the basis of a policy-motivated unjust factor.51 Thus, beyond being relatively sure that policy-motivated unjust factors are not in reality about deficient intention, there is little to unite them. They are apparently distinct reasons for restitution which are mandated by specific and unconnected legal policies, such as the principle that there should be no taxation without legislative authority which supports the rule that payment of tax under ultra vires legislation is recoverable by the claimant, or the desire to encourage rescue by non-intermeddlers, said to underlie the necessity policy-motivated unjust factor. Policy-motivated unjust factors are, therefore, a category of fragments. This category poses a serious risk to the unjust enrichment model. The integrity of the unjust factors is undermined by the existence of unconnected and perhaps unconnectable reasons for restitution. In some ways, this replicates the position in common law before the unifying effect of the recognition of a general principle against unjust enrichment.52 Beyond the overriding requirement to show the other elements of liability, such as ‘enrichment at Ibid, 315. Citing Rogers v Price (1829) 3 Y & J 28 9 (Exch) (undertaker); Re Berkeley Applegate (Investment Consultants) Ltd [1989] Ch 32 (liquidator); and The Zuhal K [1989] 1 Lloyd’s Rep 151 (guarantor). 51 Birks and Mitchell, n 7 above, 580–3. As will be discussed herein, Birks subsequently revised this view even further. He argued that the right of the intervener to reimbursement, negotiorum gestio, was a fourth category ‘other’ event, not unjust enrichment. However, he conceded that to the extent that the common law does not admit a negotiorum gestio (which only ever yields compensation or reimbursement), there would be a small residue of cases yielding restitution and explicable pursuant to ‘benefits conferred in an emergency’ or ‘necessity’. See Birks, n 5 above, 23–4. See also L Aitken, ‘Negotiorum Gestio and the Common Law: A Jurisdictional Approach’ (1988) 11 Sydney Law Review 566; P Birks, ‘Negotiorum Gestio and the Common Law [1971] Current Legal Problems 110. 52 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL); Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221 (HCA). In Australia, there is still some tension around Deane J’s statement in Pavey (ibid, 256–7) that unjust enrichment ‘constitutes a unifying legal concept’, rather than a doctrine which forms the principled basis of a number of different causes of action. For a thorough explosion of this view, see J Moore, ‘Spangaro v Corporate Investment Australia Funds Management Ltd’ (2005) 29 Melbourne University Law Review 573. 49 50

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the expense of the claimant’, there is no in-built rationale or limit on this category, other than the assumption that it is a category of default where we locate reasons for restitution that are not a result of deficient intention. The identification of the relevant legal policy is decided externally to the unjust enrichment model, and there is no attempt, because it is simply not possible, to theorise at any level of generality about whether the law’s policy is also protected via recognition as an unjust factor in unjust enrichment. As Birks said, the policy motivations for restitution ‘did no more than confess the miscellany. It left an unbridged gap between “miscellaneous other reasons” and non-voluntary transfer.’53

B Birks’s ‘Lack of Sufficient Explanatory Basis’ Model Following the emergence of absence of consideration as an alleged reason for restitution in the swaps cases,54 Birks argued that English law had moved away from the unjust factors approach, preferring instead the civilian absence of juristic reasons or no basis for the retention of the benefit approach.55 Under this latter approach, it is necessary to ask in relation to transfers of wealth whether the transfer does or does not rest on a recognised explanatory basis. If there is a recognised reason for the enrichment, for example discharge of a debt, the enrichment is explicable and is not therefore unjust. Unjust enrichments are those which are inexplicable according to the law’s list of known explanations.56 Birks, n 5 above, 107. Westdeutsche v Landesbank Girozentrale v Islington LBC [1994] 4 All ER 890, 955 (HC). Westdeutsche was an open swaps case, but the absence of consideration or basis reasoning was even more powerful in closed swaps cases. In a closed shop it is difficult to argue that there has been any failure of basis since arguably both parties have obtained all that they bargained for, so any basis by definition cannot have failed. Rather, in such cases, the ultra vires nature of the transaction rendering the contract void operated such that there was an absence of basis or consideration for the benefit conferred. This was the preferred approach of Robert Walker LJ, as he then was, in Guinness Mahon & Co Ltd v Kensington and Chelsea Royal London Borough Council [1999] QB 215, 239–40 (CA). Morritt LJ also highlighted the invalidity of the swap contract, an approach consistent with the no basis approach. Only Robert Walker LJ adopted an unjust factors approach, characterising the unjust factor either as mistake or as a policy-motivated unjust factor. The majority in the Court of Appeal in Westdeutsche (Dillon and Kennedy LJJ) also conceded that failure of basis might be the unjust factor, without overruling the absence of basis analysis identified by Hobhouse J: [1994] 4 All ER 890, 960–1. 55 The impact of Birks’s later work is only now beginning to be understood. Lord Hoffmann, in Deutsche Morgan Grenfell Group plc v IRC [2006] 3 WLR 781, 789, confirmed that 53 54

‘at any rate for the moment, . . . unlike civilian systems, English law has no general principle that to retain money paid without any legal basis (such as debt, gift, compromise, etc) is unjust enrichment’. However, he acknowledged (as did Lord Walker) that the question of the future development of English law in this respect was an open one. 56 Birks, n 5 above, 46.

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Leaving aside those situations in which the plaintiff has no control over the enrichment of the defendant,57 Birks separated his discussion into those enrichments which were perceived to be obligatory and those which were not. In relation to apparently obligatory transfers of wealth, the basis will fail if there was in reality no obligation. Non-obligatory transfers are usually made to achieve some outcome, such as a gift, a trust or pursuant to a contract. If this outcome does not come about, then the basis will have failed.58 There having been no basis for the retention of the benefit by the defendant, the enrichment is unjust and liable to be returned via an award of restitution. In this revised scheme, there is still a role for some of the unjust factors to the extent that they assist in understanding why a plaintiff transfers wealth. In particular, intention-based unjust factors are used to shed light on the possibility, which runs across both the obligatory and non-obligatory categories, that what the plaintiff intends is in reality a gift. Birks uses the example of a person who pays believing the money to be due under a debt to be discharged. It later turns out that there was no debt. On the absence of basis approach, the simple answer is that the plaintiff is entitled to recover this money as having been paid when it was not due. However, other analyses of these facts are also possible. The plaintiff might have positively intended the transfer as a gift, never mind the apparent obligation to pay, or might not have been sure whether it was due or not and decided to pay anyway, taking a risk on the validity of the obligation. In the model, the plaintiff who intends a gift (assuming that it succeeds) cannot recover because, the basis of her transfer having held good, there is a legal explanation for the payment. The plaintiff who pays taking the risk is also taken in the end to intend a gift because she accepts that the money is not due but pays anyway.59 However, the plaintiff might have actually paid mistakenly believing there to be a legal obligation to pay. In the unjust factors approach, we would have analysed these latter facts as a case of the plaintiff’s vitiated intention to transfer wealth, the unjust factor grounding the claim being mistake. In the new Birksian model there is still a background role for mistake and other unjust factors around deficient intent, which is to demonstrate or confirm on the particular facts that the plaintiff did not intend a gift, since she mistakenly believed the money was due.60 Therefore, there is no basis for the payment and the injustice of the claim is demonstrated. The limited reconciliation which Birks offers between the no basis approach and the unjust factors approach is centred on those unjust 57 Birks gives the example of a plaintiff who has been the victim of a pickpocket, the enrichment in that case having no explanatory basis: ibid, 129. 58 Ibid. 59 Ibid, 130 (the busker example). 60 Ibid, 101–5, 110–11.

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factors, such as mistake and pressure, which go to establish the deficiency of the plaintiff’s intention to transfer the benefit. These intention-based unjust factors have a role in illuminating the basis for the transfer. For example, because the deficiency of intention is the very reason why the obligation is invalid (such as through the exertion of illegitimate pressure)61 or because the transfer in respect of money not due might have been construed by the law as a gift, mistake is relevant to demonstrate that this was not the basis of the payment and thus that there is no legally recognised ground for it. However, in all cases, the overriding reason for restitution is that there is no legally satisfactory explanation for the defendant’s retention of the benefit. There is an absence of basis. In this reconciliation, Birks stated that there was no room for policy-motivated unjust factors, other than as reasons for the invalidity of the basis of the enrichment which were not to do with the voluntariness of the payment.62 The relevance of the specific policies which in the unjust factors approach might or might not have mandated a right to restitution will be to the question of defences. Leaving to one side the impact on the defences, this model still runs the risk of instability when dealing with the policy motivations for restitution. Even in their new role, where the specific legal policies are not relevant other than as reasons why the basis of the transfer is invalid, the unjust enrichment model takes no role in unifying or predicting these non-intention-based reasons for invalidity. As was the case with the unjust factors approach, the model externalises this inquiry. Birks goes further and suggests that, at least in the case of the Woolwich decision, the case could have been explained according to the no basis for the transfer model.63 The policy-motivated unjust factor approach was not necessary. As explained above, Woolwich paid money to the Revenue pursuant to regulations which Woolwich was convinced were ultra vires and void. Crucially, Woolwich had not been subject to illegitimate pressure and had made no mistake. There was no mistake of fact and, as it turned out, Woolwich had not made a mistake of law. Birks suggests that, following the swaps cases, the case could have been understood as payment in respect of a non-existent debt. On the approach which asks whether there is a legally recognised basis for the transfer, the money was prima facie recoverable. The difficulty with this explanation is that Woolwich paid knowing that the money was not due, the main reasons for payment being fear of damage to its reputation by not paying and the (legitimate) ‘coercive powers of the state’ triggered by non payment.64 In this respect, it is hard to see why Birks’s revised model would not cast the 61 62 63 64

Ibid, 135ff. Ibid, 110. Ibid, 134–5. Woolwich, n 8 above, 171.

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payment as a grudging gift. On the facts, there was no mistake or pressure to negate the conclusion that the money was as good as an actually intended gift. Birks acknowledged that one of the difficulties with the unjust factors approach was that, within the category ‘unjust’, the policy-motivated class weakened the unity of the category.65 His revised model diminishes the importance of these policy rationales, at least in the injustice inquiry. However, in doing so the instability of the policy-motivated category is replicated in the ‘other reasons for invalidity’ category and the analysis has some difficulty accounting for one of the categories of case in which English law is relatively certain that policy does have a role to play.

C

Corrective Justice Analysis

Recent work has demonstrated how a theory of corrective justice might be used to explain the main features of private law, including the law of unjust enrichment.66 The discussion here is not intended to critique this view, other than to notice that even at this higher level of abstraction, policymotivated unjust factors are unstable. Professor Smith builds on the work of Professor Weinrib to show how autonomous unjust enrichment might be accommodated within Weinrib’s corrective justice analysis.67 However, as will be noted below, this explanation is limited to unjust factors which are a function of a deficiency in the plaintiff’s intention to transfer wealth. The analysis is forced to externalise policy-motivated unjust factors. Weinrib identified that Aristotle’s conception of corrective justice requires that the parties be returned to their pre-transactional equality, but ‘[Aristotle] never elucidates the nature of this equality’.68 In other words, the pre-transactional equality between the parties has been upset and this equality must be restored. Assuming that Aristotle cannot be taken to have simply meant equal in material or other wealth, this then begs the question of how to conceive of the pre-transactional equality between the parties. Weinrib’s answer was to draw on Kant’s concept of right, such that ‘the Birks, n 5 above, 106. E Weinrib, The Idea of Private Law (Cambridge, MA Harvard University Press, 1995); K Barker, ‘Unjust Enrichment: Containing the Beast’ (1995) 15 Oxford Journal of Legal Studies 457; K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in J Neyers et al (eds), Understanding Unjust Enrichment (Oxford, Hart Publishing, 2004) ch 5; D Klimchuk, ‘Unjust Enrichment and Corrective Justice’ in ibid, ch 6; M McInnes, ‘Unjust Enrichment: A Reply to Professor Weinrib’ [2001] Restitution Law Review 29; M McInnes, ‘The Measure of Restitution’ (2002) 52 University of Toronto Law Journal 163; L Smith, ‘Restitution: The Heart of Corrective Justice’ (2001) 79 Texas Law Review 2115. 67 Smith, ibid. 68 Ibid, 2119. 65 66

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parties are equal . . . as self determining agents’.69 Both parties have the same capacity to act as self determining agents, ‘[t]he equality of corrective justice [is] . . . the equality of free wills in their impingement of one another’.70 Corrective justice will be satisfied when the parties are returned to their pre-transactional positions as free-willed self-determining agents. Smith shows that intention-based unjust factors can be explained by Weinrib’s model.71 An example is a mistaken payment. The plaintiff who transfers value to the defendant under the force of a mistake is not acting as a self-determining actor, ‘[the transfer is] not a free expression of self-determining agency’.72 Rather, the effect of the mistake is to impair the plaintiff’s intention to transfer wealth. The transfer is normatively flawed from both the plaintiff’s side and the defendant’s side, and therefore violates corrective justice.73 By comparing the position of the parties with the position they would be in had the Kantian regime of rights and duties been observed, we are able to reach the conclusion that the defendant must give up the wealth received from the plaintiff.74 As Smith points out, the same analysis is not possible in relation to policy-motivated unjust factors.75 Whilst these cases are potentially explicable under the mantle of corrective justice, it is not possible to use Kantian notions of right to provide the normative content which gives life to the notion of pre-transactional equality. After noting that the Woolwich principle violates a norm of public law,76 Smith shows that other policy-motivated unjust factors are also potentially explicable as violations of other, non-Kantian norms. He discusses the policy-motivated unjust factor usually entitled ‘payments pursuant to a common liability’ as being explicable on the basis of distributive justice.77 The plaintiff and the defendant may both be under a legal obligation to pay a third party, but between them it is the defendant who is primarily liable. For example, the plaintiff may be a guarantor of the defendant’s debt to a third-party creditor. If the third party is paid by the plaintiff, the plaintiff has recourse against the defendant. It is the policy of the law to ensure that the burden of common liabilities falls on the right party so that, in cases where the Ibid, 2119. Weinrib, n 66 above, 84. Smith, n 66 above, 2141–3. Ibid, 2141. Ibid. Ibid, 2120; McInnes, ‘The Measure of Restitution’, n 66 above, 163, 188. Smith, n 66 above, 2144–5. See also Barker, ‘Understanding the Unjust Enrichment Principle in Private Law’, n 66 above, 100–1, on the limits of the corrective justice explanation of strict liability in unjust enrichment. 76 Smith, n 66 above, 2144. Smith also refers to the policy of the law in encouraging people to withdraw from illegal transactions. 77 Ibid, 2145. See also Birks and Mitchell, n 7 above; C Mitchell, The Law of Contribution and Reimbursement (Oxford, Oxford University Press, 2003); Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366, 387 and 388 (HL). 69 70 71 72 73 74 75

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plaintiff has been required to pay more than his fair share of a common liability, the plaintiff may seek contribution or reimbursement from the other party who shared this liability. Smith points out that corrective justice cannot resolve who between the plaintiff and the defendant is the correct party to bear the burden of the liability, and tentatively suggests that the normative work to allocate the pre-transactional equality between the plaintiff and the defendant be done by distributive justice.78 To the extent that the law admits a policy of encouraging rescue, it might be possible to locate this as another external norm informing the right to recover. It is difficult, however, to reconcile the requirement that some non-Kantian norm has been violated with the notion that the policy of the law is to encourage future action79 through rescue.80 The point of these examples is to show that in the policy-motivated category the model cannot account for policy-motivated unjust factors. As Smith explains:81 So in all of these cases of policy-based unjust enrichment, we seem to have a relationship which fits Aristotle’s formal structure, but the normative input that identifies the transfer as violative of corrective justice is non-Kantian.

The fact that the normative framework is non-Kantian is not of itself the problem.82 The point is that the conceptual unity made possible by viewing all of the intention-based unjust factors through the Kantian lens is destroyed in the policy-motivated category. This model of corrective justice delegates the normative inquiry to potentially multiple frameworks and offers no means of understanding them as a rational whole. As we have seen, this is a problem endemic to policy-motivated unjust factors. It is merely replicated at this higher level of analysis. Ibid. Barker, ‘Understanding the Unjust Enrichment Principle’, n 66 above, 97, also makes the point that corrective justice is restorative and backward-looking. The future conduct of a potential rescuer might be affected by the application of the rules to the past, but this could be characterised as an incidental beneficial consequence. 80 Dagan investigates the normative basis of a possible rule which gives restitution to good samaritans in order to encourage necessitous interventions. He suggests that personal liberty, in the form of an intervention which meets the benefactor’s ex ante preferences, and also altruism, either in the form of a paternalistic model which justifies overriding the beneficiary’s personal preferences or in a form which sees social value in inculcating personal concern for others, both provide a good rationale in favour of a right for the good samaritan to recover. However, he explicitly does so without reference to corrective justice, focusing only on the impact of the potential rule in modifying the behaviour of (in the sense of encouraging) potential good samaritans: Dagan, n 25 above, 1156–7. 81 Smith, n 66 above, 2145. 82 Smith identifies one point of distinction, that violation of Kantian norms does not require material losses to be suffered by the plaintiff and material gains to be made by the defendant because the normative losses and gains satisfy the need to protect the bilateral element of corrective justice (that is, explaining why this defendant must make restitution to this plaintiff). By way of contrast, Smith suggests that, in the case of non-Kantian norms, material gains and losses are required to meet this requirement of correlativity: Smith, ibid, 2144 at n 118. 78 79

Understanding Policy-motivated Unjust Factors III

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POSSIBLE SOLUTIONS

This analysis considers two possible solutions to the instability of policy-motivated unjust factors. The first is to relocate them on the map, either by recognising some or all of them as instances of restitution, but not for restitution of unjust enrichment, or else by understanding them as examples of vitiated intention. The second is to leave them in as a distinct category within unjust enrichment, but to keep in mind when viewing this category the broader canvas of the law. This analysis ultimately comes down in favour of the second alternative.

A

Relocating the Policy Motivated Claims on the Map

There are two variants or parts to this strategy: allocating the policymotivated claims to category four, ‘other events’, and/or shifting the work to the intention-based unjust factors. Both strategies operate to limit or abolish the policy-motivated category. (i)

Restitution but Not Unjust Enrichment

As we know, the Birksian taxonomy classifies the generic events as consent, wrongs, unjust enrichment and a fourth category, other.83 One possible solution to the instability is to cast policy-motivated unjust factors as restitution yielding events, but not to place them within the event of unjust enrichment. Rather, it is possible that policy-motivated claims belong within the fourth category. Birks in part went down this path when he considered the place of negotiorum gestio on the map.84 Pointing to the fact that the intervener’s right to recovery is based not on gain, but on a loss-based measure of compensation for expenses incurred, Professor Birks concluded that negotiorum gestio, to the extent that it exists in common law, is a fourth category event rather than an unjust enrichment event. The response is compensation, not restitution, the effect of which is to ‘take the right out of unjust enrichment and indeed out of the law of restitution’.85 Birks was a long time advocate for recognition of negotiorum gestio within the common law, but nonetheless conceded that if the law ultimately makes a choice against recognising negotiorum gestio,

Birks, n 5 above, ch 2. Ibid, 22–4. Birks and Mitchell, n 7 above, 583, speaking of the same taxonomic choice to be made in all cases of necessitous intervention. 83 84 85

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some particular instances of uninvited intervention would be found . . . [to] form the kernel of a much narrower doctrine of necessitous intervention within unjust enrichment.86

Edelman and Bant explore a similar analysis in relation to policy-motivated unjust factors, arguing that there is some evidence that policy-motivated claims in Australia are moving towards being treated as fourth category events rather than as unjust enrichment.87 Hiving off policy-motivated unjust factors in this way does address the instability within the unjust enrichment category. The unjust factors remaining would then be unified as being intention based. Two comments may be offered. First, although this offers the prospect of coherence within unjust enrichment, it shifts the instability further up the model so that it is then manifest at the higher level of generality of the fourth category. Theory makes no attempt to unify the fragments of the fourth category: it is by definition the default category. Therefore, the fact that there is no unity to the policy-motivated reasons for restitution is apparently not of concern because there is no unity to the other elements of the fourth category either. However, it is conceivable that we might have to start worrying about the contents of this category. Even though to enumerate its contents might require ‘encyclopaedic erudition’,88 at some point the contents of the miscellaneous category again have the potential to undermine the entirety. The utility of the taxonomy is compromised if the criteria are not sufficiently sensitive to the phenomena to be understood. Placing the policy-motivated claims in the fourth category may mean that in the short term we have a more sophisticated view of the law of restitution than is currently allowed by a focus on unjust enrichment. However, as the list of fourth category events grows, we should be concerned to determine the ambit of that category. The second observation flows from the fact that we are more certain that some policy-motivated claims are about unjust enrichment than we are about others. For example, in relation to the recover of ultra vires payments from public authorities, judicial analysis has clearly and explicitly been about reversing unjust enrichment.89 The same cannot be said about necessity. As commentators have pointed out, there are difficulties in fitting all of the cases into an unjust enrichment analysis so as to articulate a general principle of necessity, the alternative being that necessity is protected via non-unjust enrichment awards.90 For example, as Birks, n 5 above, 23–4. J Edelman and E Bant, Unjust Enrichment in Australia (Melbourne, Oxford University Press, 2006) 294. 88 Birks, n 5 above, 22. 89 Woolwich, n 8 above, 171–7, 196, 201, 204. 90 A Burrows and E McKendrick, Cases and Materials on the Law of Restitution (Oxford, Oxford University Press, 1997) 473–5; Burrows, n 25 above, 304, 322. G Muir, ‘Unjust 86 87

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Burrows and McKendrick point out, it is not always clear that the defendant has been enriched by the intervention.91 They refer to the well-known Canadian case of Matheson v Smiley,92 in which a surgeon was called to treat a man who had attempted suicide. Despite the surgeon’s efforts, the man died. The court awarded reasonable remuneration to the surgeon but did not consider the issue of whether or not the patient had been enriched. Similarly, there is some difficulty in identifying the precise ambit of the unjust factor. There is some consensus that the policy being protected is the encouragement of rescue so as to protect the life and property of others.93 However, there is still doubt about specific issues, such as whether or not the intervener could have communicated with the defendant.94 Given that not all of the policy-motivated claims are equally entrenched, this then poses a problem. If the solution adopted is to move these claims to the fourth category, then presumably all of the policymotivated claims must be relocated. However, given that some analysis commits the cases to unjust enrichment, this then poses a difficulty. Adopting a system where some policy-motivated events are unjust enrichment and some are not again replicates the uncertainty. Moving all of the policy-motivated claims allows for the unity of the unjust enrichment category to be maintained, and also allows for the possibility that the response may be alternately compensatory or restitutionary (thus accommodating some of the reimbursement-type cases within necessity). However, this only seems viable to the extent that all of the claims are moved. Otherwise, it will be necessary in relation to each policy to add a further layer of inquiry which is to discover whether the policy is one protected via a claim in unjust enrichment.95 Even assuming that coherent answers are possible to this question, the instability within the unjust factors will remain.

Sacrifice and the Officious Intervener’ in P Finn (ed), Essays on Restitution (Sydney, Law Book Company, 1990) ch 9. Burrows and McKendrick, ibid, 473 and Burrows, n 25 above, 320, especially n 13. [1932] 2 DLR 787 (Manitoba CA). 93 Burrows, n 25 above, 316. Birks and Mitchell, n 7 above, 582–3. Virgo also suggests that the established categories of necessity embody general principles which could be used to flesh out a general principle of necessitous intervention, but does not specifically articulate the policy beyond ‘the policy of encouraging people to help those who are in urgent need of assistance’: Virgo, n 6 above, 124, 297. 94 The Winson [1982] AC 939 (HL); In re F [1990] 2 AC 1, 75 (per Lord Goff, who said that there should be no recovery when the intervention was contrary to the ‘known wishes of the assisted person’) (HL). 95 There is the additional practical point that by conceding that some claims are category four events which yield restitution (if not also compensation), the question becomes why the additional burden of proving the elements of a claim in unjust enrichment, including the risk of a change of position defence, would be attractive. This point is made in Edelman and Bant, n 87 above, 317. 91 92

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(ii) Re-cast as Vitiated Intention A different version of the strategy of relocation is to re-examine the policy-motivated claims to make sure that they cannot be better understood as examples of vitiated intention, thereby eliminating parts, if not ultimately all, of the policy-motivated category. For example, Birks and Mitchell describe a category of policy-motivated claim called ‘Payments Pursuant to a Common Liability’.96 This category deals with the situation where the plaintiff and the defendant are both legally liable to perform an act or pay a third party in respect of the same debt or damage. Where the plaintiff performs the service or pays the third party in full, the plaintiff may be entitled to recover this value on the ground that the recipient third party or defendant will otherwise be unjustly enriched at his expense. Restitution is said to be available not because of any vitiation in the intention of the plaintiff, but because of the policy of the law in realigning benefits and burdens. Edelman and Bant also explore this strategy and offer an alternative explanation, based on an intention-based unjust factor, powerlessness.97 Using as an example the well-known case of Exall v Partridge,98 they point out that Exall, who had left his carriage for repair at Partridge’s premises, had no choice if he wanted his carriage back but to pay to the landlord Partridge’s arrears of rent. In doing so, Partridge was enriched by discharge of his debt. Edelman and Bant point out that in enriching Partridge in this way, the benefit was not conferred intentionally. The payment was primarily a means for Exall to retrieve the carriage, and by paying the landlord Exall was powerless to prevent Partridge’s enrichment. In a manner akin to ignorance, there was no intention to confer a benefit on Partridge.99 Whether or not the powerlessness analysis is persuasive, this method of altering the contents of the policy-motivated category does not address the instability problem. Minimising the contents of the category does not destroy its existence.

B Locating the Policies at a System Wide Level As has been said, the uncertainties around the policy-motivated category have two interconnected aspects. The first is that there is no internal coherence to that category. In contrast to the intention-based unjust factors, where the model has both explanatory and predictive force, the 96 97 98 99

Birks and Mitchell, n 7 above, 576–80. Edelman and Bant, n 87 above, 282–9. (1799) 8 Term Rep 308 (KB). Edelman and Bant, n 87 above, 283–4.

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policy-motivated claims seem to exist as stand-alone constructs within the unjust enrichment category. The second is that the policy motivations are external to the unjust enrichment model; they are imported into it. This exposes two further uncertainties: (i) since the policies relevant to the policy-motivated claims are external to the unjust enrichment model, the set of available policies appears limitless; and (ii) there seem to be no criteria articulated to inform us which of the set of available policies is to be protected in unjust enrichment as a novel policy-motivated unjust factor. Unlike the intention-based category, where the guiding principles allow for development by analogy,100 the only requirement seems to be that recovery in unjust enrichment should be protected via a specific legal policy. There are no particular criteria which must be met to justify the establishment of a particular policy-motivated unjust factor. The key to understanding both of these aspects of the policy-motivated claims lies in appreciating that they are part of an entire system. The system of law is produced by the existence and operation of different categories, and, most importantly, the interactions between the categories. It will be argued that, once a system-wide view is taken, the destabilising impact of the policy-motivated claims is minimised. (i)

Limitless List of Policies

In relation to the risk that the set of available policies appears limitless, the obvious point can be made that the legal policies which we know are protected in unjust enrichment also find expression in other legal mechanisms. Put another way, we should not be surprised that specific policies of the law find expression in unjust enrichment when they also exist in other places. For example, in articulating the Woolwich principle, Lord Goff was very clear that recovery in unjust enrichment was required to give full effect to an underlying constitutional principle:101 the retention by the state of taxes unlawfully exacted is particularly obnoxious, because of one of the most fundamental principles of our law—enshrined in a famous constitutional document, the Bill of Rights 1688—that taxes should not be levied without the authority of Parliament; and full effect can only be given to that principle if the return of taxes exacted under an unlawful demand can be enforced as a matter of right.

Similar observations may be made about the unjust factor which arguably gives restitution of benefits conferred in an emergency. It is necessary 100 There must be room for the development of new unjust factors, even in the intention based category. See CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714, 720. 101 Woolwich, n 8 above, 172. See also P Birks, ‘Restitution from the Executive: A Tercentenary Footnote to the Bill of Rights’ in Finn, above n 90, ch 6; P Birks, ‘“When Money is Paid in Pursuance of a Void Authority . . .”—A Duty to Repay?’ [1992] Public Law 580.

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carefully to define the policy said to underlie this unjust factor, since not all of the cases marshalled in support of the unjust factor make explicit reference to the same policy motivation. However, building on the foundation of the salvage cases, it can be argued that the policy of the law is to encourage rescue, in the sense that it is essential for someone to intervene to protect the defendant or his property: that is, harm (to health or property) would be very likely to ensue if someone did not intervene.102

This has resonance with the position in tort law surrounding the position of rescuers. There is no general duty to rescue unless there are special circumstances that might give rise to such an obligation.103 However, a rescuer who is injured whilst undertaking a rescue cannot be defeated by the claim of voluntary assumption of risk. The doctrine does not apply to:104 [a person who has acted] . . . under an exigency caused by the defendant’s wrongful misconduct, consciously and deliberately faced a risk, even of death, to rescue another from imminent danger of personal injury or death, whether the person endangered is one to whom he owes a duty of protection, or as a member of his family, or is a mere stranger.

Danger invites rescue so that it is reasonably foreseeable that a defendant who owes a duty of care to the victim of a tort also owes a duty to those who might foreseeably attempt to rescue the victim from the danger to the victim created by the defendant’s negligence.105 To this extent, there is a general encouragement of rescue attempts. Therefore, the set of policies available for recognition in the policy-motivated category is not undefined, at least to the extent that the canvas of our legal system and legal policies are relatively ascertainable. (ii) Criteria to Identify or Admit the Policy Motivated Claims The second aspect of instability is our inability to identify criteria to determine which policies will find expression in unjust enrichment. This section will argue that it is in fact not possible to create a filter from within 102 Burrows, n 25 above, 316. Kortmann, n 25 above, 189, argues that the position of English law is to discourage beneficial interventions:

‘It threatens those who do intervene with liability in negligence if they display carelessness in the course of the intervention, while it rewards those who refuse to intervene with immunity against such liability. Again, intervention is discouraged when the courts deny interveners a claim, thereby forcing them to risk having to bear al the costs of the intervention themselves.’ 103 Horsley v MacLaren (The Ogopogo) (1971) 22 DLR (3d) 545 (SCC); Capital and Counties plc v Hampshire CC [1997] QB 1004 (CA). 104 Haynes v Harwood [1935] 1 KB 146, 157(CA). 105 Haynes v Harwood [1935] 1 KB 146 (CA); Baker v T E Hopkins & Son Ltd [1958] 1 WLR 993 (HC). See also A Burrows, Understanding the Law of Obligations (Oxford, Hart Publishing, 1998) 34–40.

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unjust enrichment capable of predicting the policies which will find protection in the unjust enrichment category. Rather, the role of unjust enrichment within the system must be appreciated in order to minimise the local instability within that category. The system of law is produced by the different categories of events and the interactions between them. Our focus on the unjust enrichment category, even as it exists on the broader Birksian taxonomy, means that the impacts of other events are not always in view. Unjust enrichment as a category is synergistic; it works with the other events. Some of the space for unjust enrichment is created by these other regimes.106 For example, whether or not a promise is enforceable may be allocated to the consent category. Once there is a breach of that promise, the issue is then potentially allocated to unjust enrichment to give the remedy of restitution for unjust enrichment via failure of basis reasoning, or to wrongs.107 Another example is the Woolwich claim. As a result of the regulatory arrangements concerning the payment of tax and the regime which allows the court to strike down a law after tax has been paid, there is a role for an unjust enrichment claim. Unjust enrichment in that context is arguably facilitative of the regulatory context in returning an invalidly demanded tax payment. Given the synergistic nature of the categories within the system, it is simply not possible to create a filter from within unjust enrichment capable of determining which policies will or will not find protection in that category. Unjust enrichment as a category must at a high level of generality be capable of responding to and interacting with all other categories and events in the system. Not only is it not possible, but arguably it is also not necessary to have a filter to predict policy-motivated unjust factors in order to ensure rationality and normative stability. Rather, the core unjust enrichment concepts continue to exist but are capable of operating and, in respect of the recognised policy-motivated claims, do operate in different contexts.108 Despite this, unjust enrichment remains a coherent and intelligible category. The system is able to cope with compartmentalised uncertainty (or at least relative uncertainty) without challenging the whole edifice. To this extent, unjust enrichment is both internally coherent and also open to the rest of the system. By taking a system-wide view, we can both see the 106 For an example of this type of analysis in relation to the law of tort, see A Corbett, ‘The (Self) Regulation of Law: A Synergistic Model of Tort Law and Regulation’ (2002) 25 University of New South Wales Law Journal 616. 107 A variety of responses being possible, including compensation and disgorgement. See Attorney-General v Blake [2001] 1 AC 268 (HL). 108 There are, of course, limits to this argument. We can identify contexts and spaces where unjust enrichment is not permitted to operate. For example, despite the decision in Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (HCA), granting restitution in respect of a benefit transferred under a contract still on foot, it is generally accepted that a contract must be discharged before an unjust enrichment claim is available.

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impossibility of designing a filter to determine the contents of the policy-motivated category and observe that, so long as core unjust enrichment principles remain,109 the instability in the policy-motivated category is minimised.

109 For example, we still ask the same questions in the policy-motivated category. We still require enrichment at the expense of the plaintiff, etc. This core is supported by the fact that the intention-based unjust factors are relatively stable and have some predictive force.

15 Restitutionary Liability of Public Authorities in Canada RES TI TUTI ONARY LI ABI LI TY OF PUBLI C AUTHORI TI ES I N CANADA

JOHN D McC AMU S * J OHN D MCCAMUS

I

I NTRO DUCTION

I

N RECENT DECADES, Canadian courts, and, in particular, the Supreme Court of Canada, have made a noteworthy contribution to the development of the law relating to the restitutionary liability of public authorities. Perhaps the most widely known innovation was anticipated by the dissenting opinion of Dickson J in Hydro Electric Commission of the Township of Nepean v Ontario Hydro,1 which mounted a sustained and eventually successful attack on the traditional bar against the recovery of payments made under a mistake of law. Although the mistake of law bar was, of course, of more general application, the ultimate decision in which the Supreme Court embraced Dickson J’s Nepean dissent illustrates the proposition that the abolition of the traditional bar is of particular significance in the context of restitutionary claims made against public authorities. In Air Canada v British Columbia,2 a case involving a claim to recover taxes paid to the defendant province under legislation that was ultra vires in the federal constitutional sense of that term, a majority of the Supreme Court adopted the views expressed by Dickson J in Nepean, thus sounding the death knell for the traditional rule in the Canadian context. Although relief was denied on other grounds in Air Canada, recovery of payments made pursuant to a mistake of law was awarded in a companion case3 against the same province. The opinion of Dickson J in Nepean was noteworthy in a number of respects, not the Professor of Law and University Professor, Osgoode Hall Law School, York University. [1982] 1 SCR 347 (SCC). [1989] 1 SCR 1161 (SCC). Canadian Pacific Airlines Ltd v British Columbia [1989] 1 SCR 1133 (SCC). As we shall see, an important distinction between the claim in this case and that brought in Air Canada is that the legislation at issue in Canadian Pacific was intra vires and valid, but misapplied to the plaintiff airline. Unlike the situation in Air Canada, then, the payments were thus made on the basis of a mistake of law as to the proper interpretation of an otherwise valid statute. * 1 2 3

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least of which being that abolition of the mistake of law bar was placed firmly on the ground that the doctrine was rendered indefensible in light of the Canadian adoption of the unjust enrichment principle as the proper foundation for restitutionary liability. As is well known, Dickson J’s analysis in Nepean appears to have been of some assistance in enabling the High Court of Australia4 and the House of Lords to achieve similar conclusions.5 Although abolition of the mistake of law bar is perhaps the most dramatic development of this kind, there have been a number of other developments in modern Canadian restitutionary law that have increased the exposure of the Crown to restitutionary liability. Three are of particular interest. First, in a series of cases prior to the decision in Air Canada, the Supreme Court had substantially lowered the threshold for a finding of duress as a basis for recovery of moneys paid to public authorities. In these cases, the Supreme Court appeared to abandon the strict requirements of the traditional doctrines of duress, including the doctrine of colore officii,6 and to replace them with a rule holding, in effect, that moneys paid to a public authority are recoverable where the payer was under some ‘practical compulsion’ to make the payment. Indeed, it was suggested that, as between a citizen and the state, the state ought to bear the primary responsibility for not exceeding its legal capacity in extracting payments from citizens and, accordingly, that a general rule favouring recovery of payments made in the presence of such demands should be recognised.7 The doctrine might be referred to as one of presumptive duress. The mere fact that the demand is made by the Crown establishes that the payment was made under compulsion. The interests of the law-abiding citizen who makes a payment assuming that the government is acting lawfully in making the demand should prevail, it seems, over the interests of the state that has acted unlawfully in doing so. A second development of interest pertains to restitutionary liability for benefits conferred under ultra vires agreements. The Supreme Court contributed to a long series of Canadian decisions8 that honourably, if somewhat illogically, confined the effect of the ‘bewildering’9 decision of the House of Lords in Sinclair v Brougham,10 culminating in its recent David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 (HCA). Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (HL). Generally, see P Maddaugh and J McCamus, The Law of Restitution (Aurora, Canada Law Book, 2nd edn, 2004) 672–6. 7 Eadie v Township of Brantford [1956] SCR 573, 582 (SCC); Air Canada v Ontario (Liquor Control Board) [1997] 2 SCR 581, 613 (SCC); Air Canada v British Columbia, n 2 above, 1214 (SCC). Cf Air Canada v British Columbia, ibid, 1209–1210. 8 See generally P Maddaugh and J McCamus, n 6 above, 448–73. 9 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 713 (HL). 10 [1914] AC 398 (HL). 4 5 6

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decision in Pacific National Investments Ltd v Victoria (City).11 In this latter case, the defendant city was held liable for the value of capital works constructed by the plaintiff developer under what proved to be an ultra vires and unenforceable development agreement. The developer had been contractually obliged to construct the works as part of a large development project approved by the defendant under the agreement. In due course, the defendant, acting under political pressure from neighbouring residents, breached the unenforceable undertaking by ‘downzoning’ the subject property, thus precluding completion of the approved development project. The developer brought a restitutionary claim for the value of the capital works already completed. The defendant’s argument that the capital works represented more of a burden than a benefit, as they would require ongoing maintenance by the city, was given short shrift by the Court, Binnie J observing that ‘[t]he City’s portrayal of itself as a victim of the appellant’s generosity is not credible’.12 The third development to be noted relates to the application of fiduciary duties to the Crown. If it is true, as some have observed,13 that Canadian courts have tended to apply the concept of fiduciary relationship in an expansive manner, it is also true that public authorities have not escaped the fiduciary net and have been subjected to the restitutionary liabilities imposed on those who breach their fiduciary obligations.14 In the midst of this modern Canadian deluge of restitutionary liability for the Crown, however, one solitary beacon of continuing immunity appeared to stand out. In the Air Canada decision itself, in which La Forest J, carrying with him on this point a majority of the Court, had embraced the reasoning of Dickson J in Nepean, La Forest J also offered, in an obiter dictum, the view that an exception to the new rule permitting recovery of moneys paid under a mistake of law ought to be recognised in order to render the Crown immune from relief in cases of moneys paid under ultra vires legislation. La Forest J’s concern to avoid the prospect of excessive restitutionary liability of the Crown was also manifest in his suggestion that, in any event, moneys paid to the Crown ought not to be recoverable in cases where the payer had ‘passed on’ the burden of such liabilities to third parties. Thus, in Air Canada itself, the plaintiff airline 11 [2004] 3 SCR 575 (SCC). See also Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL). 12 Ibid, 587. In reaching the conclusion that the capital works in question constituted a benefit to the defendant city, Binnie J placed reliance on the notion expressed in the opening section of the Restatement to the effect that any requested service constitutes a benefit to the requester. See American Law Institute, Restatement of the Law of Restitution: Quasi-Contracts and Constructive Trusts (St. Paul, MN, ALI, 1937) 26. 13 A Mason, ‘The Place of Equity and Equitable Doctrines in the Contemporary Common Law World’ in D Waters (ed), Equity, Fiduciaries and Trusts, 1993 (Toronto, Carswell, 1993) 10–13. 14 See, eg Guerin v The Queen [1984] 2 SCR 335 (SCC); Authorson v Canada (Attorney General) [2003] 2 SCR 40 (SCC).

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which had paid provincially imposed gasoline taxes on fuel acquired within the province would have been denied relief by La Forest J on the basis that, in theory at least, the plaintiff airline had ‘passed on to their customers the burden of the tax imposed upon them’.15 In both respects, of course, the opinion of La Forest J is distinctly un-Birksian. Indeed, in his opinion, La Forest J made particular reference to and rejected the early views of Professor Birks on the question of the recoverability of ultra vires payments.16 As we shall see, the views of Professor Birks on these issues evolved over time. So, too, have the views of the Supreme Court of Canada. In its recent decision in Kingstreet Investments Ltd v New Brunswick (Department of Finance),17 the Supreme Court had occasion to consider the recoverability of liquor taxes paid by the proprietors of night clubs and taverns under legislation ultimately held to be ultra vires the defendant province. The results of the recent deliberations of the Court are distinctly Birksian in character and offer more evidence, if any is needed, of the persuasive force of his work.

II

T H E RE C OVE RY O F PAYM E N T S MA D E UN D E R U LT R A DECISION VI R E S L E G I S L AT I O N : T H E

Although the decision of the Supreme Court of Canada in Air Canada provided the occasion on which the Court affirmed the views expressed in dissent by Dickson J in Nepean and overruled the traditional mistake of law bar to restitutionary recovery of moneys paid under mistake, relief was actually denied to the plaintiff taxpayer on various grounds, including, as noted above, the fact that the payments had been made under ultra vires legislation. The legislation in question was provincial legislation imposing a tax on purchasers of gasoline within the province of British Columbia. The province had taken the position over the years that the gasoline tax applied to the purchase of gasoline within the province by airlines. The plaintiffs sought reimbursement of something in the order of $30 million in taxes paid since 1974 under what was alleged to be ultra vires legislation. The constitutional validity of provincial tax legislation rests on a distinction between direct and indirect taxation. The provinces are restricted to the levying of direct taxes within the province in question. The levying of indirect taxes can be undertaken only by the federal level of government as part of its broad constitutional mandate to raise revenue by any mode or type of taxation system. Under the Canadian constitution, then, the most likely ultra vires taxation problem to arise is that a provincial government 15 Air Canada v British Columbia, n 2 above, 1202. See generally P Maddaugh and J McCamus, n 6 above, 378–84. 16 Ibid, 1206. 17 [2007] SCC 1, (2007) 276 DLR (4th) 342.

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will have enacted a constitutionally invalid ‘indirect’ tax. It was conceded by the province in Air Canada that it could be expected that the airlines would pass on the burden of the gasoline tax in increased charges to their customers and, accordingly, that the gasoline tax was an unconstitutional indirect tax. The province sought to defend itself, however, on the basis of the mistake of law bar. That defence, as we have seen, failed. The majority of the Court, however, held that the province was entitled to defend on the basis that it had successfully cured the defect in the legislation with retroactive effect. We shall return to this point herein. La Forest J added, for good measure but without majority support, that recovery of ultra vires taxes was, in any event, precluded. Immunity for the Crown in the context of ultra vires taxing legislation was defended by La Forest J on the basis of ‘solid grounds of public policy’.18 The first ground related to what might be considered a type of change of position defence. A government collects revenues and determines its expenditures in light of the estimated income it will receive through taxing measures. If it is required to refund taxes, the only practical alternative for the Crown would be to impose a new tax to pay for the old, which is another way of saying that a new generation must pay for the expenditures of the old.19

La Forest J disparaged this alternative by suggesting that ‘[a]t best it is simply insufficient’. A second concern articulated by La Forest J related to the potential for excessive liability. Drawing in part on American experience, La Forest J was concerned that a rule favouring recovery in the context of long-standing taxation measures could impose extremely burdensome liability on governments with consequent disruption of the public treasury and, indeed, ‘fiscal chaos’. The airlines were not, of course, the only taxpayers to have paid gasoline taxes over the years. La Forest J quoted a passing reference in the judgment of the British Columbia Court of Appeal to the effect that ‘other large taxpayers, including one of the national railways’ had commenced similar litigation and were awaiting the outcome of the Air Canada case.20 Although La Forest J conceded that limitation periods might provide a device for containing such liability, that solution was, in his view, unavailable to the courts. The equitable doctrine of laches was unsatisfactory as it required some ‘discernible act of acquiescence’21 on the part of the taxpayer. A statute of limitations would be more effective, but it would be inappropriate, he suggested, for the courts to define such periods on their own initiative. 18 19 20 21

Air Canada v British Columbia, n 2 above, 1204. Ibid. Ibid, 1205. Ibid, 1206.

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A third concern related to the rather technical nature of the source of constitutional invalidity and the fact that a properly advised provincial government might well be able retroactively to reimpose the same or a similar tax burden on taxpayers subjected to unlawful exactions, notwithstanding the invalidity of the initial measure. In making this point, La Forest J may well have drawn upon his own expertise in the matter of the Canadian constitutional arrangements concerning matters of taxation. Prior to his judicial appointment, La Forest J had had a distinguished career as a legal academic and public servant. Among his published works is the leading text on the constitutional division of taxation powers in Canada.22 Also present to his mind, of course, were the facts of the Air Canada case itself. In 1976, British Columbia enacted a statute amending its gasoline tax legislation in such a way as to impose a direct tax of the same amount as the earlier legislation on a defined set of taxpayers that would include the plaintiff airlines. Although this provision took effect only from 1976 onwards, the province enacted further legislation in 1981 which purported to apply the amendments retroactively back to 1974 and to legalise the retention of tax revenues collected under the earlier version of the statute during that period. In Air Canada, the Court held that the 1976 legislation cured the defect in the earlier law and, further, that the 1981 legislation enjoyed success in its retroactive application of the amendments to the 1974–76 period. In circumstances where the level of government in question could simply replace the invalid taxing measure with a valid and retroactive measure capturing the same revenue, it is perhaps not surprising that La Forest J appeared to consider the exercise of initially allowing recovery to be a somewhat idle one. Where the invalid legislation could not be cured, presumably, La Forest J favoured immunity on the basis of the apparent unfairness or inefficiency of taxing a new group of taxpayers to pay for the benefits enjoyed by the old, coupled with the potential problem of fiscal chaos. It was in the context of these reasons that La Forest J considered the position advanced by Birks in An Introduction to the Law of Restitution (‘the Introduction’),23 in which Birks had briefly rehearsed the arguments made in his earlier 1980 article published in Current Legal Problems (‘the 1980 article’),24 to the effect that a general right of restitution for payments exacted by the Crown without lawful authority ought to be recognised. The principal foundation for the argument advanced was that such a proposition could be grounded on the constitutional principle against executive taxation.25 In the Introduction, and in the 1980 article, 22 G La Forest, The Allocation of Tax in Power under the Canadian Constitution (Toronto, Canadian Tax Foundation, 2nd edn, 1981). 23 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985). 24 P Birks, ‘Restitution for Public Authorities’ (1980) 33 Current Legal Problems 191. 25 Ibid, 297.

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Birks had conceded that there might be a serious danger that public finances would be disrupted by recognition of the right and, accordingly, that it might be necessary to limit or exclude the right in some circumstances. As a general matter, however, he favoured recovery. La Forest J was unpersuaded. After briefly summarising Birks’s position, he observed as follows:26 I agree that the value he favours is worthy of protection, but in the context of taxes exacted through unconstitutional statutes in light of the other policies outlined above, I am not willing to give it the dominant status that Birks would accord it.

Interestingly, La Forest J did not expressly ground his rejection of Birks’s views on the basis that they were inapplicable to federal jurisdictions where the problem was one of unconstitutional legislation rather than mere executive taxation. Birks was analysing the problem of ultra vires as it arises in a unitary system—delegated legislation that exceeds the powers to legislate conferred by the primary legislation or so-called ‘administrative ultra vires’—and he acknowledged that the problems of fiscal disruption might be more severe in a federal system.27 La Forest J did not pick up on this point. Nonetheless, it is quite consistent with La Forest J’s explicit analysis to infer that he considered the ‘no taxation without representation principle’ to have less persuasive force in the context of a constitutionally invalid taxation measure. In dissent, Wilson J indicated a strong lack of enthusiasm for La Forest J’s various rationales for his proposed immunity rule. In her view, the general principle should be that moneys paid in response to an unconstitutional demand should be recoverable. She expressed the sense of fairness underlying the plaintiffs’ claim in the following terms:28 What is the policy that requires such a dramatic reversal of principle? Why should the individual taxpayer, as opposed to taxpayers as a whole, bear the burden of government’s mistake? I would respectfully suggest that it is grossly unfair that X, who may not be (as in this case) a large corporate enterprise, should absorb the cost of government’s unconstitutional act. If it is appropriate for the courts to adopt some kind of policy in order to protect government against itself (and I cannot say that the idea particularly appeals to me), it should be one that distributes the loss fairly across the public. The loss should not fall on the totally innocent taxpayer whose only fault is that it paid what the legislature improperly said was due.

Although Wilson J’s views did not prevail on this occasion, many would come to the view that she had the better side of the argument. 26 27 28

Air Canada v British Columbia, n 2 above, 1206. Birks, n 24 above, 205; Birks, n 23 above, 298. Air Canada v British Columbia, n 2 above, 1215.

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D E VE L O P M E N T S P O S T-

The Supreme Court did not return to the question of the status of La Forest J’s proposed immunity doctrine until the recent decision in Kingstreet Investments.29 In the interim, a number of interesting developments had occurred. First, the views of Professor Birks on these matters had evolved over time. The position recommended for English law in the 1980 article stopped short of a rule permitting comprehensive recovery of moneys paid in response to ultra vires demands. In essence, the 1980 article recommended curing some anomalies in the applicable law of duress, but stopped short of recommending recovery in the context of claims to recover moneys paid in response to a bare demand, ‘ie demands not arising from situations in which there is a potentiality for duress’. In 1980, Birks was writing in the context of English law, which, at that time, still precluded the recovery of moneys paid under a mere mistake of law. Accordingly, the recovery of payments in response to ultra vires demands could succeed only on the basis of the doctrine of duress. Unless the plaintiff could establish actual or threatened interference with the plaintiff’s rights beyond the mere threat of legal proceedings, the moneys paid would be irrecoverable. Under traditional duress doctrine, the plaintiff would be required to establish a demand for payment coupled with actual or threatened duress to the plaintiff’s person or actual or threatened seizure of the plaintiff’s goods. A further particular form of duress—referred to as the doctrine of colore officii—available against public officials permitted recovery where payment was made in response to a demand to pay for the performance of a statutory duty which the defendant was bound to perform for a lesser sum than that demanded. If the threat made by the defendant is merely one of commencing legal proceedings, the moneys paid are irrecoverable on the theory that the payer should challenge the demand in those proceedings rather than merely acquiesce and pay. In the 1980 article,30 Birks subjected the then current state of English law to a powerful critique. First, he argued that the duress requirement, under established law, leads to contradictory positions or results. In particular, the ‘colore officii’ or ‘entitlement’ line of authority is vulnerable to this charge. In cases where the defendant making the official demand is requiring payment with respect to something which the payer wishes, such as a licence, and which it is the duty of the official to provide without payment or for a lesser payment, the excess payment is recoverable, even though the payment is not exacted by the use of threats involving more than a mere threat of legal proceedings. The colore officii doctrine is stricter than traditional duress, then, in the sense that it does not ground 29 30

n 17 above. Birks, n 24 above.

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recovery on the making of such threats. The Crown is exposed to liability on a more strict standard. The combined effect of the traditional duress doctrine and colore officii leads, as Birks demonstrated, to anomalous results. In the particular context of licensing schemes, for example, moneys improperly exacted by the threatened withholding of a licence to which the payer was entitled would be recoverable on grounds of colore officii. If, however, the entire licensing scheme is ultra vires with the result that the payer is not entitled to the issuance of the license in any event, the moneys are irrecoverable. Colore officii is not applicable in such a case and one would have to establish that threats engaging traditional duress doctrine were made by the Crown. In other words, the payer’s ‘hope of restitution diminishes as the illegality established against the agency becomes more radical’.31 For Birks, this outcome was simply intolerable. Secondly, the current state of the doctrine would lead to the conclusion that a payer who ‘never thinks to challenge the claim and consequently never senses the threat’32 has paid under a mistake of law rather than under duress and accordingly the payment is irrecoverable. For Birks, this outcome ‘contradicts prevailing standards of public morality’.33 A third concern was that the requirement of duress inadequately protects the principle, enshrined in the Bill of Rights34 that there shall be no taxation without the consent of Parliament, for it means in the ordinary case money levied without parliamentary consent can be kept.35

For Birks, this high constitutional principle suggested that all payments in response to unauthorized official demands ought to be recoverable unless there is a good reason to the contrary.36

The power of this critique might lead one to the conclusion that all payments made in response to unauthorised demands by public authorities ought to be recoverable. For Birks, however, there were limiting factors that weighed against so comprehensive a reform. First, he recognised that there was some force in the claim that public bodies have their own interest in the security of their receipts and society has a wider interest in the stability of their finances.37

Birks further noted, however, that ‘the danger of general invalidations is much less in a system in which primarily legislation cannot be struck 31 32 33 34 35 36 37

Ibid, 197. Ibid. Ibid. [1688] 1 Wm 3 and M Sess 2, c 2. Birks, n 24 above, 203. Ibid. Ibid, 204.

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down’.38 As noted above, this suggestion is quite consistent with the views expressed by La Forest J in Air Canada to the effect that the claim arising from the public interest in the stability of the treasury might be a stronger one in the context of a federal constitution. It has not been much noted in later discussions of Birks’s views. In any event, the weight of this concern within the English context was, for Birks, sufficient to suggest that in situations where a ‘bare demand’ is made by public authority, that is, a demand is made in circumstances where the authority has no other pressure to apply to the payer other than the mere threat of litigation, recovery should be withheld. Birks further suggested that recovery should be denied in cases where the error underlying the demand is simply the misinterpretation of a valid enactment. In other words, in order to ground recovery, the error must be jurisdictional in nature. Finally, Birks suggested that where the payer is ‘the party primarily responsible for what has happened’39 recovery should also be denied. In sum, then, Birks recommended that payments made in response to an ultra vires demand should be recoverable where (i) the authority is withholding something to which the payer is entitled without charge or for less than the charge demanded or (ii) in circumstances where the authority has the power to apply pressure ‘by recourse to other extra-curial pressure, as for instance, seizure of goods’.40 And in either case, the question of whether the authority has the power to apply pressure of either kind should be considered from a de facto perspective in the sense that duress should be found even if it were to be determined that the basis for the explicit or implied threat was itself invalid. In essence, this position recognises the legitimacy of the traditional colore officii line of authority and improves the traditional duress cases by proposing that even in the case of an ultra vires licensing scheme, for example, moneys paid for the issuance of a license which the authority had no lawful basis to issue would be recoverable. With respect to bare demands, however, Birks’s conclusion was that recovery should be denied on the ground that right to recover ‘is here inhibited by the need to protect the stability of public funds’.41 A few years later, in the Introduction, Birks offered a much briefer account of his views. He reiterated that the dominant orthodoxy was that the citizen who pays an ultra vires demand must establish either payment under mistake of fact or under duress in order to gain recovery. Again, Birks noted the vulnerability of the traditional authorities to criticism. The old cases could not be explained simply on the basis of duress as they clearly, in his view, involved cases in which, although there might have been a potentiality for pressure, no pressure had actually been applied or 38 39 40 41

Ibid, 205. Ibid. Ibid, 206. Ibid.

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apprehended by the payer. Birks also noted, however, that there are considerations that weigh against recovery and, in particular, noted that Where there is a serious danger that public finances will be disrupted it may be necessary to limit or exclude a right to restitution.42

Although Birks again noted that this was a particular concern in jurisdictions in which the constitutional validity of taxing statutes was a possibility, he here suggested that it is arguable the resources of a modern state can bear such dangers in the interest of defending the rule of law.43

Strikingly, Birks did not indicate that recovery should be denied in the context of bare demands as a means of accommodating the public interest in stability of the treasury, and it may well be that, by the time of the Introduction, he had come to the conclusion, perhaps tentatively, that a general right to recover, even in the case of bare demands, ought to be recognised. Certainly, this was his view by the time of the publication of ‘Restitution from the Executive: A Tercentenary Footnote to the Bill of Rights’ in 1990 (‘the 1990 article’).44 Birks had by then come to the view that more comprehensive reform was desirable. The shift in his views is adumbrated by his emphasis on the Bill of Rights in his subtitle for the 1990 article, and by his discussion therein of the Air Canada decision. Having provided an account of La Forest J’s proposed immunity rule, Birks then quoted the passage from Wilson J’s dissent, set out above, and observed that this is the only tercentenary utterance which is true either to the spirit of the Bill of Rights or to the underlying position of the common law as subsequently worked out.45

Birks had come to the conclusion that the dominant consideration in structuring the restitutionary right to recovery of ultra vires taxes is the constitutional value reflected in the Bill of Rights and that this value commanded a right of recovery in all cases. In contrast to the position he had taken earlier, Birks now favoured recovery even in cases of bare demands, that is, cases where the unlawful demand for tax payments is coupled only with the possible threat of litigation. On this view, then, ultra vires taxes should be recoverable simply on the ground that the demand by the state authority was unlawful in a jurisdictional sense. This constitutional value could only be properly expressed in the law if it grounded a comprehensive right to recovery. Abolition of the mistake of law bar would not suffice as it would not ground recovery in cases where the taxpayer was Birks, n 23 above, 298. Ibid. P Birks, ‘Restitution from the Executive: A Tercentenary Footnote to the Bill of Rights’ in P Finn (ed), Essays on Restitution (Sydney, Law Book, 1990) 164. 45 Ibid, 174. 42 43 44

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aware of the legal deficiency in the state’s demand. The possibility explored in the Canadian jurisprudence, of adopting what is in effect a presumptive duress rule in any case where an unauthorised imposition is made, also did not appeal to Birks. Any such presumption in his view:46 is a fiction which hides the constitutional value which the law defends. Its true basis is the absence of parliamentary authority for the imposition in question. That is to say, it is founded directly on an ultra vires character of the demand, and its purpose is to defend the principle of governmental legality.

As in the 1980 article, Birks defended the proposition that this position was not inconsistent with a proper reading of English law by drawing support from Hooper v Exeter Corporation47 and Steele v Williams,48 and by a close reading of more modern authorities lending indirect support to this view. The inconvenient authorities of Slater v Burnley Corporation49 and Twyford v Manchester Corporation50 were subjected to a withering attack. Of his earlier and more conservative position, Birks observed that he ‘was then over-impressed by the need to safeguard public funds’51 and noted that his own position had changed considerably since I first addressed this topic, in the light both of new cases and academic contributions of others.52

A revised view of the importance of the potential for fiscal disruption was central to his change in thinking. On this point, he provided a sustained explanation for the view that the prospect of fiscal disruption ought not to stand in the way of a general restitutionary right. Although Birks conceded that there is ‘a real interest in the security of the public purse’,53 denial of restitution was said to be a blunt instrument that failed to give proper regard to ‘a competing interest, namely public confidence in the legality of governmental action’.54 For several reasons, Birks was now of the view that the preferable course was an automatic right to restitution. First, the government has means at its disposal to replenish government coffers. It is ‘relatively immune from insolvency’.55 On this point, he invoked Wilson J’s dissent in Air Canada, noting that it was Ibid, 204. (1887) 56 LJQB 457 (HC). (1853) 8 Exch 625 (Exchequer). (1888) 59 LT 636 (QB). [1946] Ch 236 (HC). Birks, n 44 above, 168. Ibid. In particular, he acknowledged his indebtedness to an article by Professor Cornish. See W Cornish, ‘Colour of Office: Restitutionary Redress against Public Authority’ [1987] Journal of Malaysian and Comparative Law 41. 53 Ibid, 201. 54 Ibid. 55 Ibid. 46 47 48 49 50 51 52

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not obvious why the overpaying taxpayer should bear the risk of the unlawful demand rather than the body of taxpayers taken as a whole.56

Secondly, inconvenience or disruption to the defendant’s finances are not usually taken into account in determining liability rules.57 Thirdly, the threat of disruption is likely to be exaggerated and, as evidence for this proposition, Birks referred to the common practice of unlawful exactions being returned by the authorities in question on an ex gratia basis. On this point, it is of interest to note that Birks here mentioned in passing, once again, the proposition that the danger of disruption may depend on the constitutional arrangements of a particular country, and that the danger of disruption in the United Kingdom is ‘reduced by the fact that primary, as opposed to delegated, legislation can never be struck down in the courts’.58 Fourthly, Birks drew support for the proposition that confidence in legality is of essential importance by noting that the principle drew some support from the then recent decision of the House of Lords in R v Tower Hamlets London Borough Council; Ex parte Chetnik Developments Ltd,59 a decision granting judicial review of a determination by a local authority to refuse to exercise its discretion to repay moneys paid under a mistake of law. Fifthly, Birks drew attention to the likely impact of a pro-restitution rule on the behaviour of government departments. The prospect that unlawful impositions would have to be returned would encourage them to be ‘scrupulous in their insistence on the principle of legality’.60 Finally, Birks noted that past experience suggests that, in any event, the executive would likely use its influence over the legislature to contain the problem of fiscal disruption perhaps by the enactment of short limitation periods but ‘more likely in other ways too’.61 On these grounds, then, Birks favoured the view that the principle of legality should be considered to outweigh concerns about potential fiscal disruption, and requires that judges leave it to legislatures to impose what restrictions on the right of restitution they think necessary, wise and proper.62

The second post-Air Canada development of interest, of course, is the decision of the House of Lords in Woolwich Equitable Building Society v IRC (No 2),63 in which a Birksian analysis was applied to a claim for the recovery by the building society of taxes exacted by the defendant revenue Ibid, 202. Or as Dickson J expressed the point in Nepean, n 1 above, 376–7 (SCC), courts do not usually take into account ‘ability to pay’ or apply a ‘means test’ in fashioning liability rules. 58 Birks, n 44 above, 203. 59 [1988] AC 858 (HL). 60 Birks, n 44 above, 203. 61 Ibid. 62 Ibid, 204. 63 [1993] AC 70 (HL). Generally, see J Beatson, ‘Restitution of Taxes, Levies and Other Imposts: Defining the Extent of the Woolwich Principle’ (1993) 109 LQR 401. 56 57

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authority under an administratively ultra vires taxation scheme. The defendant had imposed levies on building societies under regulations promulgated in a purported exercise of the authority’s statutory powers. The plaintiff had resisted payment on the view, which proved to be correct, that the taxation scheme was ultra vires the powers conferred on the authority. The House of Lords ordered recovery, even though, on traditional duress principles, such a result would not have been warranted. The defendant had not made threats of a kind that would engage the traditional doctrines of duress. Relief was grounded on the simple fact that the moneys had been exacted by the defendant under an ultra vires scheme. Lord Browne-Wilkinson considered the claim to be ‘the paradigm of a case of unjust enrichment’64 and declared that such money should be recoverable since the citizen is, in practice, unable to resist the payment at the risk of breaking the law or exposing himself to penalties or other disadvantages.65

Lord Slynn found it quite unacceptable in principle that the common law should have no remedy for a taxpayer who has paid large sums or any sum of money to the revenue when those sums have been demanded pursuant to an invalid regulation and retained free of interest pending a decision of the courts.66

Lord Goff specifically invoked and relied upon the views expressed by Birks in the 1990 article. Lord Goff summarised the existing doctrine as permitting recovery only where the moneys had either been paid under a mistake of fact rather than law, or under compulsion where the pressure brought to bear is something other than the mere threat of litigation.67 Though Lord Goff was not completely persuaded by Birks’s reading of the earlier cases, he was nonetheless able to conclude that it was open to the House of Lords to recognise the principle advocated by Birks that money paid in response to an ultra vires demand by a public officer was, as such, recoverable. The justice underlying such a claim was, for Lord Goff, ‘plain to see’.68 In justifying what was conceded to be an important change in the law, pride of place was given by Lord Goff to the proposition that it is one of the most fundamental principles of our law—enshrined in a famous constitutional document, the Bill of Rights, 1688—that taxes should not be levied without the authority of Parliament.69

Lord Goff also placed emphasis on the fact that 64 65 66 67 68 69

Ibid, 197. Ibid, 198. Ibid, 204. Ibid, 164–5. Ibid, 171. Ibid, 172.

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when the revenue makes a demand for tax, that demand is implicitly backed by the coercive powers of the state and may well entail (as in the present case) unpleasant economic and social consequences if the taxpayer does not pay.70

Further support was drawn by Lord Goff from the passage in Wilson J’s dissent in Air Canada, quoted above, the reasoning in which Lord Goff found ‘most attractive’.71 Plainly, the favourable result in Woolwich was not premised on an extended notion of duress. In particular, Lord Goff stated on this point that since the possibility of distraint by the Revenue was very remote, the concept of compulsion would have to be stretched to the utmost to embrace the circumstances of such a case as this.72

Nor was comfort to be found in the prospect that the law of mistaken payments might evolve in such a way as to allow the mistaken payment of ultra vires taxes to be recoverable. The plaintiff in this case was suffering from no mistake of any kind. Lord Goff concluded that logic appears to demand that the right to recovery should require neither mistake nor compulsion, and that the simple fact that the tax was exacted unlawfully should prima facie be enough to require its repayment.73

From a Canadian perspective, of course, the Woolwich decision pertained only to the recovery of exactions which are ultra vires in the administrative sense. Nonetheless, the adoption of a principle favouring recovery in these circumstances and, more particularly, the enthusiastic response to Wilson J’s dissent in Air Canada was likely to be of interest to Canadian courts. Finally, to set the table for the Supreme Court’s reconsideration of La Forest J’s proposed immunity rule, brief mention should be made of two further decisions of the Supreme Court of Canada rendered in 1997 and 1998. In the earlier of the two, Air Canada v Ontario,74 the Supreme Court reaffirmed the presumptive duress rule in allowing recovery of a ‘mark-up’ charged by the provincial liquor control authority on the sale of alcoholic beverages to the plaintiff airline on the basis that the charges resulted from a misinterpretation by the authority of its enabling statute. Although, as with the previous decisions on point, this case could be analysed, in more traditional terms, as an entitlement case, the Court did not invoke traditional colore officii doctrine. Rather, relief was granted on the basis that 70 71 72 73 74

Ibid. Ibid, 176. Ibid, 173. Ibid. n 7 above.

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The responsibility for taking care that the law is legal and applicable must rest with the party that makes and administers the law.75

In the later case, Re Eurig Estate,76 the Supreme Court allowed a claim for the recovery of probate fees which had been exacted under regulations subsequently declared to be ultra vires in the administrative law sense. The plaintiff, who had initially protested but ultimately paid probate ‘fees’ imposed by the regulation, successfully claimed for their recovery on the basis that the ‘fee’ was in fact a tax that had not been validly enacted. Although the Court agreed with this position, it noted that such a tax could be validly enacted by the province and, although recovery was granted to the plaintiff, the Court otherwise suspended the declaration of invalidity of the regulations for six months in order to provide the province a period of time in which ‘to address the issue’.77 The Court considered the potential relevance of La Forest J’s proposed immunity rule and concluded that it was not applicable. The plaintiff had challenged the validity of the regulation and protested payment of the fee. In such circumstances, the Court held, the Crown could not rely on the immunity principle.

IV

AND ULT RA VIRES

It was against the background of these developments, then, that the issue of the recoverability of constitutionally ultra vires taxes squarely surfaced before the Supreme Court of Canada in the recent Kingstreet Investments78 case. The plaintiffs operated a number of night clubs in New Brunswick that were licensed to sell alcoholic beverages. In purchasing such beverages from the provincial liquor authority, the plaintiffs were subjected to a ‘user charge’. The charges were prescribed by a regulation adopted under the provincial liquor control legislation which arguably authorised the imposition of charges of this kind. The trial judge held that the user charge constituted an unconstitutional indirect tax but denied relief on the basis that the burden of the tax had been ‘passed on’ to the plaintiffs’ customers.79 As we have noted, the availability of a passing on defence in these circumstances had been proposed by La Forest J in Air Canada. The decision at trial was modified by the New Brunswick Court of Appeal80 in a rather complex fashion, permitting recovery with respect to the taxes paid after the plaintiffs had protested the making of such payments on the Ibid, 613. [1998] 2 SCR 565 (SCC). Ibid, 586. In due course, the province reimposed the tax retroactively in Estate Administration Tax Act, 1998, SO 1998, c 34. 78 n 17 above. 79 (2004) 236 DLR (4th) 733 (NBQB). 80 (2005) 254 DLR (4th) 715 (NBCA). 75 76 77

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basis of the unlawful nature of the tax. In these circumstances, the Court of Appeal held, the defence of passing on was no longer available to the Crown. When the matter reached the Supreme Court of Canada, however, the decisions below were reversed. The reasoning of the Court relied very heavily on the analysis set forth by Birks in the 1990 article. Writing for a full and unanimous court, Bastarache J observed as follows:81 [T]he Court’s central concern must be to guarantee respect for constitutional principles. One such principle is that the Crown may not levy a tax except with the authority of the Parliament or the legislature . . . This principle of ‘no taxation without representation’ is central to our conception of democracy and the rule of law . . . When the government collects and retains taxes pursuant to ultra vires legislation, it undermines the rule of law. To permit the Crown to retain an ultra vires tax would condone a breach of this most fundamental constitutional principle. As a result, a citizen who has made a payment pursuant to ultra vires legislation has a right to restitution.

In addition to support drawn directly from Birks, Bastarache J placed great emphasis on the decision of the House of Lords in Woolwich, agreeing, it appeared, with Lord Goff that allowing recovery was a simple matter of ‘common justice’.82 In articulating the general principle in favour of recovery, the Supreme Court appeared to draw no distinction between constitutional ultra vires and the administrative ultra vires scheme at issue in Woolwich in terms of the nature and importance of the ‘fundamental constitutional principle’. Turning to consider and then reject La Forest J’s proposed immunity rule, Bastarache J made a number of points. First, he rejected the immunity rule on the basis that it was simply inconsistent with the rationale articulated by Wilson J in dissent in Air Canada to the effect that ‘[w]here the payments were made pursuant to an unconstitutional statute there is no legitimate basis on which they can be retained’.83 Second, a general rule permitting recovery was more consistent, in his view, with the well-established rule that the Crown is entitled to recover moneys paid out of the consolidated revenue fund without parliamentary approval.84 If the constitutional principle requiring the Crown to spend public money under legislative authority generates a rule entitling the Crown to recover moneys paid without such authority, the constitutional limitation on the Crown’s right to raise revenue should support a parallel conclusion that improperly exacted impositions are recoverable by the payer. Bastarache J concluded that ‘[i]n my view, these principles are really two sides of the same coin’.85 81 82 83 84 85

Kingstreet Investments, n 17 above, paras 14–15. Ibid, para 17. Ibid, para 20. Auckland Harbour Board v The King [1924] AC 318 (PC). Kingstreet Investments, n 17 above, para 24.

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Bastarache J then turned to consider La Forest J’s defence to the proposed immunity rule on the basis of a concern for ‘fiscal inefficiency and fiscal chaos’.86 For Bastarache J, concerns regarding potential fiscal chaos are best left to Parliament and the legislatures to address, should they choose to do so.87

Moreover, Bastarache J drew further support from the fact that, as Re Eurig Estate88 indicates, a court can suspend a declaration of invalidity for a period of time in order to provide the defendant Crown with a period of time in which to make appropriate adjustments to deal with the situation. Further, Bastarache J noted that it will often be open to Parliament and to the legislatures to enact valid taxes and apply them retroactively, so as to limit or deny recovery of ultra vires taxes.89

La Forest J’s concern that the granting of recovery with a consequent necessity on the part of the Crown either to reimpose retroactively the tax burden on the original taxpayers or to raise revenues from a new generation of taxpayers to pay for benefits showered on the older generation was also found to be unpersuasive. On this point, Bastarache J simply invoked the persuasive rebuttal offered by Wilson J in her dissenting opinion in Air Canada, which, as we have seen, found favour both with Professor Birks and with Lord Goff in Woolwich. In this important decision, then, the Supreme Court of Canada has adopted a general rule granting recovery to taxpayers of taxes paid under ultra vires legislation. The Court clearly rejected the proposed immunity rule proposed by La Forest J in the Air Canada case and grounded recovery on the basis of the high constitutional principle articulated and advocated as the underlying basis for recovery by Professor Birks.

V

T H E D E F E N C E O F ‘ PAS S I N G O N ’

In Air Canada, La Forest J had also indicated that, quite apart from the proposed immunity rule, he would have been prepared to deny relief on the basis that the plaintiff airlines had in any event passed on the burden of the allegedly improper taxes to their customers. In such circumstances, in his Ibid, para 25. Ibid. n 76 above. Kingstreet Investments, n 17 above, para 25. Bastarache J also considered that La Forest J’s concern that Canadian constitutional law might preclude the enactment of legislation confiscating unlawful taxes was misconceived. Here, Bastarache J was on less certain ground. La Forest J’s reliance on the previous decision of the Supreme Court of Canada in Amax Potash Ltd v Government of Saskatchewan [1977] 2 SCR 576 for this point is surely sound. Bastarache J’s reply to the effect that the Amax Potash decision would not preclude the enactment of valid retroactive legislation recapturing the wrongfully exacted revenues is not in pari materia. 86 87 88 89

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view, the benefit conferred on the Crown has not been conferred ‘at the expense’ of the taxpayer. As La Forest J observed: ‘The law of restitution is not intended to provide windfalls to plaintiffs who have suffered no loss.’90 This suggestion, however, fared no better with the Court in Kingstreet Investments than did his general immunity proposal. Drawing to some extent from academic criticism of the defence and from its rejection by the High Court of Australia,91 Bastarache J rehearsed what he characterised as the three major criticisms of the passing on defence: first, that it is inconsistent with the basic premise of restitution law; second, that it is economically misconceived; and third, that the task of determining the ultimate location of the burden of the taxes is exceedingly difficult and constitutes an inappropriate basis for denying relief.92

With respect to the first point, Bastarache J accepted the suggestion made by others that the mere fact that the plaintiff may have passed on the burden of the payment to third parties did not affect the situation between the plaintiff and the defendant. The latter was enriched at the expense of the former. Bastarache J further noted that the third parties in such a case might well have a claim of some kind against the successful plaintiff, but this is a matter which he did not explore in depth. With respect to the economic aspects of the defence, Bastarache J placed reliance on the fact that it is difficult to determine, as an economic matter, the impact of a tax burden. The burden of a tax imposed on a commercial entity will usually be passed on, presumably, through an increase in the taxpayer’s pricing structure. It is, as Bastarache J noted, difficult to determine what effect a change in a company’s prices will have on its total sales. Unless the elasticity of demand is very low, the plaintiff is bound to suffer a loss, either because of reduced sales or because of reduced profit per sale. Where elasticity is low, and it can be demonstrated that the tax was passed on through higher prices that did not affect profits per se or the volume of sales, it would be impossible to demonstrate that the plaintiff could not or would not have raised its prices had the tax not been imposed, thereby increasing its profits even further.93

Birks would agree. As he observed in the 1990 article: ‘To admit this passing on defence is to commit the court to an impossible inquiry.’94 90 Air Canada v British Columbia, n 2 above, 1202. For an exhaustive and penetrating comparative analysis of the defence, leading to the conclusion that it ought not to be recognised, see M Rush, The Defence of Passing On (Oxford, Hart Publishing, 2006). 91 Commissioner of State Revenue (Victoria) v Royal Insurance Australia Ltd (1994) 182 CLR 51 (HCA). 92 Kingstreet Investments, n 17 above, para 43. 93 Ibid, para 47. 94 Birks, n 44 above, 172.

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Although my own view is that the ‘difficulty of proof’ argument is a persuasive one, it must be noted that it contains a hidden irony in the Canadian constitutional context. In order to establish that a provincial tax is an invalid indirect tax, the burden is on the challenging taxpayer to establish that it is expected that the burden of the tax will be passed on to a third party. A demonstration of ‘passing on’ thus appears to be a threshold test that must be crossed in order to establish unconstitutionality in this context. After Kingstreet Investments, presumably, Canadian courts will continue to find it possible to characterise provincial taxes as indirect on this basis while, at the same time, concluding that, for purposes of restitutionary liability, the fact that the tax can be shown to have been passed on to third parties does not give rise to a defence on the theory that the very inquiry is too economically uncertain to be conducted with confidence.95 A determination which appears at least close to impossible for restitutionary purposes must remain possible for purposes of constitutional law. Be that as it may, Bastarache J was of the view that Canadian experience with the defence, including the application of the defence by the Supreme Court itself in a decision contemporaneous with Air Canada,96 demonstrates the difficulties inherent in attempting to apply the doctrine.

VI

THE S COPE OF THE N EW DOCTRINE

Although not strictly necessary to the decision in Kingstreet Investments, Bastarache J considered the potential applicability of the doctrine outside the scope of the particular facts before the Court, that is, the recovery of payments exacted under a constitutionally invalid taxation scheme. Bastarache J’s views with respect to the scope of the doctrine emerged in the context of his analysis of what he referred to as the ‘doctrine of protest and compulsion’, a novel term which, in the context, appears to refer to the 95 Indeed, in Kingstreet Investments, plaintiffs’ counsel was evidently concerned that establishing the unconstitutional nature of the tax in issue on this basis would lead to a finding that the burden of the tax had been passed on and would give rise to the passing on defence favoured by La Forest J. This concern proved prophetic as this was, in fact, the conclusion reached by the trial judge. Indeed, on the eve of trial, plaintiffs’ counsel signalled an intention to argue in the alternative that the enabling statute was intra vires and that the defective regulation under which the user charge was actually imposed fell outside the immunity doctrine proposed by La Forest J, which, it was argued, was intended to deal only with ultra vires legislation in the sense of statutory enactments. Alternatively, he proposed to argue that the legislation did not impose an indirect tax but rather a constitutionally invalid direct tax, that is a direct tax that was invalid on other constitutional grounds. The trial judge, affirmed on this point by the courts above, rejected these arguments and held that the tax was an indirect and hence ultra vires tax. For discussion of these heroics, see Kingstreet Investments Ltd v New Brunswick (Department of Finance) (2005) 254 DLR (4th) 715, 726–728 (NB CA). 96 Canadian Pacific Airlines Ltd v British Columbia [1989] 1 SCR 1133 (SCC). For discussion of the various difficulties encountered by Canadian courts in attempting to apply the defence, see P Maddaugh and J McCamus, n 6 above, 378–84.

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traditional doctrine of duress. Before turning to consider Bastarache J’s views as to the scope of the doctrine, however, it will be useful briefly to consider the relationship of the new Kingstreet Investments doctrine to the existing restitutionary doctrines allowing recovery of moneys paid under mistake of law and moneys paid under duress. Prior to the decision in Kingstreet Investments, of course, the position in Canadian law was quite different, in important respects, from the law of England as Birks described it in his articles and as Lord Goff described it in Woolwich. First, in England at that time, the traditional mistake of law bar precluded recovery of moneys paid to the Crown, or anyone else, under a mistake of law. Further, the traditional doctrine of duress, requiring pressure in the form of something other than the mere threat of litigation, was applicable to claims for the recovery of moneys paid to the Crown under compulsion. By the time of the Kingstreet Investments decision, as we have seen, the Air Canada decision allowed recovery of moneys paid under a mistake of law, and it appeared to be good Canadian law that compulsion was effectively presumed against the Crown in cases where the Crown made an unlawful demand for the payment of taxes. In the typical case, then, where the taxpayer was unaware of the legal problem, recovery would be permitted under mistaken payments doctrine. In circumstances where the taxpayer was aware of the unlawfulness of the demand, the doctrine of presumptive duress would enable recovery on this ground. The only situation in which the taxpayer could not recover would be under the immunity rule proposed by La Forest J concerning payments made under constitutionally ultra vires taxation schemes. On the basis of prior Canadian law, then, if the Supreme Court in Kingstreet Investments had wished to ensure comprehensive recovery of taxes paid in response to unlawful demands, it would have been sufficient simply to deny the existence of the immunity rule proposed by La Forest J. Once that doctrine was rejected, the taxpayer subject to an unlawful demand would normally be able to recover either on the basis of the mistaken payments doctrine or on the basis of the presumptive duress doctrine.97 This was not, of course, the position advocated by Birks.98 Birks was not attracted to the presumptive duress doctrine on the ground that it simply deprived the notion of duress of any meaning and disguised the fact that recovery was being allowed in such cases on the basis that the demand was unlawful rather than the result of an exercise in improper coercion. Further, as he noted, an expanded duress doctrine would not 97 In 1991, Andrew Burrows argued persuasively that the problem of recovering ultra vires taxes would be best addressed by the combined effect of abolishing the mistake of law bar and recognising a broader duress rule of the kind adopted by the Supreme Court of Canada. See A Burrows, ‘Public Authorities, Ultra Vires and Restitution’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Clarendon, 1991) ch 3. 98 For criticism of Birks’s solution, see A Burrows, ibid.

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provide relief where the payer was simply mistaken since, under then current law, recovery would be blocked by the mistake of law bar. On the other hand, reform of mistake doctrine, whatever its merits might have been more generally, was considered to be an unsatisfactory reform in the present context by Birks as it would not cover cases where the taxpayer was aware of the unlawful nature of the demand. Such a taxpayer is not mistaken. Nonetheless, as a practical matter in the context of Canadian law, a comprehensive rule favouring recovery could have been achieved in Canada by simply rejecting La Forest J’s proposed immunity rule and allowing the existing Canadian law of mistaken payments and presumptive duress to have its usual effect. As we have seen, Bastarache J did not address the problem in this way. Rather, he followed Birks’s approach of adopting a new rule grounding recovery on the ultra vires nature of the demand on the basis of the ‘no taxation without representation’ principle. Once one takes this position, there would appear to be no further role for either the doctrine of duress or the doctrine of mistaken payments to play in constructing the plaintiff’s case for recovery. It simply does not matter whether the plaintiff was paying under a mistake or paying under pressure of some kind applied by the Crown. The unlawfulness of the taxation measure, is, in itself, a sufficient ground for recovery. Although Bastarache J did not consider whether the new doctrine supplanted mistaken payments doctrine in the context of recovering ultra vires taxes, he does appear to have taken the view that the doctrine of compulsion would have no role to play in such a case. Thus, he observed as follows:99 [I]n my view, the doctrine of protest and compulsion is simply not applicable to cases such as the present. This flows from the constitutional basis for the right of restitution in this case; that the Crown should not be able to retain taxes that lack legal authority. It therefore matters little whether the taxpayer paid under protest and compulsion. If the law proves to be invalid, then there should be no burden on the taxpayer to prove that they were paying under protest.

In the course of this discussion, however, Bastarache J also indicated that the new doctrine may well apply beyond the scope of the present facts, that is, payment of taxes under a taxation scheme which is constitutionally invalid. Thus, he observed that I also have concerns about the applicability of the doctrine of protest and compulsion to cases where the tax, although collected pursuant to valid legislation was misapplied in relation to the taxpayer. The tax is valid, but the taxpayer should never have had to pay it.100

99 Kingstreet Investments, 100 Ibid, para 53.

n 17 above, para 52.

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This appears to mean that the new Kingstreet Investments doctrine will apply to cases where the Crown has improperly demanded the payment of a tax or similar imposition on the basis of the misinterpretation of a valid statutory enactment. Birks would probably not have gone this far. In the 1980 article, Birks specifically excluded problems of misinterpretation from the scope of his proposed doctrine. The doctrine was to be grounded on jurisdictional considerations and should not apply simply because the Crown had misinterpreted a valid statutory scheme.101 ‘Otherwise an authority would be an insurer of all its interpretations of the law.’102 In the context of misinterpretation, Birks would have presumably favoured application of the traditional duress doctrine and would have required the plaintiff to establish that the form of compulsion applied by the Crown was something other than the mere threat of litigation. In Air Canada, La Forest J had suggested that his proposed immunity rule would not apply to cases of statutory misinterpretation and accordingly, on his view, payments made on the basis of misinterpretation could be recoverable on the basis of mistaken payments doctrine. If the taxpayer was aware of the problem and was therefore not mistaken, recovery could be grounded, we might assume, on the basis of the presumed duress doctrine. Indeed, this possibility appeared to be confirmed by the decision in Air Canada v Ontario.103 What appears to have been achieved in Kingstreet Investments, however, is that the new Kingstreet doctrine has supplanted both mistaken payments and compulsion doctrine in the context of demands made by the Crown as a result of misinterpretation of a valid statutory scheme. Further, Bastarache J indicated that, in his view, Once the immunity rule is rejected, there is no need to distinguish between cases involving unconstitutional legislation and cases where delegated legislation is merely ultra vires in the administrative law sense. In all such cases, the payment of the charge should not be viewed as voluntary in the sense it would prejudice the taxpayer. Rather, the plaintiff is entitled to rely on the presumption of validity of the legislation, and on the representation as to its applicability by the public authority in charge of administering it.104

Prior to Kingstreet Investments, as Re Eurig Estate105 indicates, Canadian law would have allowed recovery on the basis of the presumptive compulsion doctrine. In a case where the payment was made under mistake of law, we may assume that the payer of the improper charge would be entitled to rely on mistaken payments doctrine. Under the Kingstreet Investments doctrine, however, recovery in such a case would be based on the new unlawful demand doctrine. 101 102 103 104 105

Birks, n 24 above, 205. Ibid. n 7 above. Kingstreet Investments, n 17 above, para 56. n 76 above.

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In summary, then, the scope of the Kingstreet Investments doctrine appears to include payments made in response to improper demands106 by the Crown pursuant to constitutionally ultra vires legislation (and it is at least implicit in Kingstreet Investments that payments under regulations that are constitutionally invalid would similarly ground relief), under delegated legislation or regulations that are invalid in the administrative law sense (that is, promulgated in excess of the powers conferred by the enabling legislation), and pursuant to the Crown’s misinterpretation of constitutionally valid legislation or delegated legislation. In all such cases, it seems, the Supreme Court considers that the doctrine of duress is no longer of relevance and it is immaterial that the payment made by the taxpayer might in some sense have been voluntary. The simple unlawfulness of the demand establishes the basis for relief. Bastarache J did not explicitly consider the potential applicability of mistake doctrine to situations within these categories in cases where the taxpayer was mistaken with respect to the lawfulness of the demand. It would seem to follow, however, that in such circumstances the proposition that the taxpayer was mistaken would be similarly irrelevant, and that recovery would be grounded on the new doctrine and would not be based on the fact that the taxpayer paid the moneys under a mistake of law.107

VII

D EMOCRACY, RESTITUTION AND UNJUST E NRICHMENT

As we have seen, the reasoning of the Supreme Court in Kingstreet Investments placed considerable reliance on the ‘no taxation without representation’ principle in reaching the conclusion that a comprehensive right to recover taxes paid in response to an unlawful demand by the Crown ought to be recognised. More than this, the Supreme Court suggested that this new doctrine was essentially a doctrine of public law rather than of private law and, more particularly, was unrelated to or independent of the operation of the unjust enrichment principle.108 Although I wish to express mild reservations with respect to each of these points, I should indicate that it is my own view that the new Kingstreet rule, providing a comprehensive basis for recovery, is a preferable solution 106 Where the payment is not provoked by a demand, the payer’s ability to recover would be left to the law of mistake and duress. The concept of demand was not explored in Kingstreet, nor was it explored in Woolwich, n 63 above. Important issues are thus left at large. Can a demand be implicit? Does the new rule apply and, if so, how does it apply to taxation schemes that rely on self-assessment? See generally Beatson, n 63 above, 405–06. 107 The House of Lords has recently taken the contrary view that the ability to recover moneys paid under a mistake of law has not been supplanted by the Woolwich doctrine in cases where that doctrine is applicable. See Deutsche Morgan Grenfell Group plc v IRC [2006] Ch 243 (CA); reversed [2006] 3 WLR 781 (HL). 108 Kingstreet Investments, n 17 above, paras 32–7.

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to the problem presented by these cases than the approach advocated by La Forest J in Air Canada. La Forest J’s proposed immunity rule was explicitly designed by him to meet the concern of potentially excessive liability or fiscal disruption. The justice of the plaintiff’s interest in recovery, as Lord Goff said in Woolwich, is ‘plain to see’.109 The difficult question, then, as Birks indicated, is whether the potential for excessive liability of the Crown outweighs the values inherent in the taxpayer’s claim to reverse the unjust enrichment of the Crown. For the reasons advanced by Bastarache J, my own view is that a rule favouring relief is preferable. I would only add that a further concern with the proposal made by La Forest J is that the proposed immunity rule for ultra vires does not squarely meet the problem of fiscal disruption. There could conceivably be cases of recovery of taxes paid under ultra vires legislation that would not produce significant fiscal disruption. On the other hand, there may well be cases involving other kinds of defects in the administration of taxation schemes—such as a prolonged practice based on a misinterpretation—that might produce what might be considered to be excessive liability. La Forest J’s proposed immunity rule is thus both over- and under-inclusive. The proposed immunity rule does not appear to be an effective means for achieving La Forest J’s goal of insulating the Crown from excessive liability and hence does not outweigh the public interest in allowing recovery in order to prevent the unjust enrichment of the Crown in such cases. Accordingly, in my view, there is much wisdom in the conclusion of the Supreme Court in Kingstreet Investments that the general rule ought to be one of favouring recovery, leaving it to the legislature to adopt various constitutionally permissible means to ward off the prospect of excessive liability. One can claim, of course, that this outcome is commanded by the ‘no taxation without representation’ principle, and the Supreme Court comes close to making a claim of this kind. As Birks reminded us, however, the adoption of this principle in the Bill of Rights 1688 was an exercise in curbing the absolutist inclinations of the English monarchy and asserting the primacy of Parliament with respect to taxation measures. The fundamental importance of the recognition of that principle to an emergent democratic society need not be belaboured. I suggest, however, that it does not necessarily follow from this principle, as night follows day, that ultra vires taxes imposed in a federal state must be recoverable. The problems presented in a federal constitutional democracy in which taxation powers are constitutionally divided between different levels of government with consequent risk that ultra vires taxation measures may be enacted by either level is surely a problem of a rather different order. In the Canadian context, the typical claim will be against a province that has enacted an ‘indirect’ taxation scheme. An elected legislature acting on the advice of 109

n 63 above, 171.

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the executive branch and, in the typical case, its lawyers, has fallen foul of the boundary—a boundary, we may note, that is often difficult to discern—between direct and indirect taxation. The taxpayers’ elected representatives have erred. Moreover, the fact that, as La Forest J observed, unconstitutional taxation measures can often be corrected by the enactment of subsequent intra vires and retroactive measures strongly suggests that the issues here are more evenly balanced and not necessarily and conclusively resolved by invocation of the ‘no taxation without representation’ principle. Indeed, in Kingstreet Investments itself, it is of interest to note that the government of New Brunswick subsequently announced its intention to enact intra vires retroactive legislation reimposing on the owners and operators of licensed establishments the user charges invalidly collected under the liquor control legislation.110 The government indicated that reimbursement of the fee to all liquor licensees in the province would cost about 12 million dollars. The minister observed that ‘we believe that New Brunswickers would sooner have that money spent on things like education and health care’.111 The government conceded, however, that the plaintiffs in the Kingstreet Investments litigation itself should be allowed to retain the one million or so dollars successfully claimed in that case. Although it remains to be seen whether the province of New Brunswick will be able successfully to implement this strategy, if it does so, it may not be obvious to all observers that the result achieved in this case is our proudest monument yet erected to the rule of law. Again, this is not to question what I believe to be the correctness of the Kingstreet Investments decision. Rather, it is to suggest that the contest between the views of La Forest J in Air Canada and the approach taken by the Supreme Court in Kingstreet Investments is a closer run affair than the historical contest between the English monarchy and Parliament.112 In Kingstreet Investments, Bastarache J described the new rule of providing for ‘restitution for ultra vires taxes’113 as a public law remedy to which the ‘ordinary principles of unjust enrichment’114 should not be applied. This is a bit surprising. Lord Browne-Wilkinson in Woolwich, it may be recalled, described recovery in these circumstances as ‘the paradigm of a case of unjust enrichment’.115 Moreover, the result in Kingstreet Investments and the rule it pronounces is quite consistent with the unjust enrichment analysis. The defence of passing on was rejected by the Court as inconsistent with basic restitutionary principles. It is not 110 The press release (7 February 2007) announcing these intentions is available at: http://www.gnb.ca/cnb/news/ps/[email protected] (as at 10 May 2007). 111 Ibid. 112 Cf M Brock, ‘Restitution of Invalid Taxes—Principles and Policies’ (2000) 5 Deakin Law Review 127 (opposing recovery in the Australian constitutional context). 113 Kingstreet Investments, n 17 above, para 40. 114 Ibid, para 39. 115 n 63 above, 197.

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entirely clear what is meant, then, by this suggestion that the claim brought in cases such as Kingstreet Investments is a public law rather than a private law claim. Certainly, the traditional view would be that a claim brought against the Crown for breach of contract, for liability in tort or for restitution is a private law claim with respect to which, to be sure, there may be particular doctrines applicable in circumstances where the defendant is the Crown. As Birks noted, the fact that a matter ‘belonged to the ordinary private law never prevented consideration of its applicability to governmental bodies’.116 Nonetheless, it would not be a traditional mode of speaking to characterise such doctrines as constitutional or public law rather than private law. It may be that Bastarache J may be taken by this to be suggesting that, as a more general matter, the doctrines of private law and, in particular, the law of restitution, may not apply to claims for restitution of ultra vires taxes. Since the Kingstreet Investments rule allows recovery as a general proposition, the other rules in question, presumably, would be defences, such as the defence of change of position. Surely, however, the question of the applicability of that doctrine should be considered on an occasion when the matter is squarely before the Court. Suppose, for example, that a small municipality enacts an ultra vires by-law under which it improperly charges fees to a local industry and then, as expected, spends the money on the construction of infrastructure works of some kind that are designed directly to service the needs of the industry in question. Some time later, having decided to pull up stakes and close its plant, the industry sues to recover the ultra vires taxes. One might wish at least to be able to consider the applicability of the defence in such a case.117 Alternatively, it may be that Bastarache J had in mind that the normal restitutionary defence of voluntary submission to an honest claim might be inapplicable in the present context.118 Again, this would surely be a matter better left to be resolved when the issue squarely arises. Certainly, it would be surprising if a court were to hold in the future that agreements of compromise in the ultra vires context could not be binding.119 Finally, it may be that the Court was principally concerned to distinguish the analysis provided in its own recent decision in Garland v Consumers’ Gas Co.120 If so, this is, in Birks, n 44 above, 166. Certainly, the defence would be available if the moneys had been paid to the municipality under a mistake (including a mistake of law). See Storthoaks (Rural Municipality) v Mobil Oil Canada Ltd [1976] 2 SCR 147 (SCC) (defence unavailable because municipality did not engage in unusual expenditures). 118 Cornish hatched the clever example of the entrepreneur who voluntarily pays for an exclusive licence, whether lawful or not, to get a leg up on competitors. See Cornish, n 52 above, 413. 119 For examples of binding agreements of compromise in the ultra vires context, see Attorney General of British Columbia v Deeks Sand & Gravel Co Ltd [1956] SCR 336 (SCC); Breckenridge Speedway Ltd v Alberta [1970] SCR 175 (SCC). 120 [2004] 1 SCR 629 (SCC). 116 117

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my view, another lamentable indication of the confusion sown by the novel approach to the analysis of restitution cases taken in that case, but that must be a topic for another day.121 Whether the new doctrine developed in the Kingstreet decision be properly characterised as public or private law, however, there can be no doubt that it marks an important shift in the direction of the law relating to the restitutionary liability of public authorities in Canada.

VIII

CONCLUSION

In the remarkable corpus of scholarly work on restitution produced by Professor Birks, the 1990 article stands out, in my view at least, as one of many classics. It manifests many of the hallmarks of a body of work that has served to inform and inspire a generation of restitution scholars. The article combines meticulous, if challenging, analysis of the relevant authorities, together with a searching analysis of underlying principle and rationale. It proposes a creative and startlingly novel solution to a problem that has been with us for some centuries. The historical grace notes both illuminate and entertain. Of the dismal decision in Slater v Burnley Corporation,122 so inconsistent in his view with the spirit of the Bill of Rights, he observed: ‘A Jacobite cloud, one must suppose, passed late in time across the face of the Queen’s Bench Division.’123 Birks had a wonderful pen. Taken together, his writings on this subject manifest another important strength of his work, a willingness to re-examine and reconsider opinions previously held. It is not surprising that his work generally and this ‘powerful essay’124 in particular have proven to be of such influence amongst legal scholars and courts in the various Commonwealth jurisdictions. The decision of the Supreme Court of Canada in Kingstreet Investments is a fitting tribute to that article and to its author.

121 In Kingstreet Investments, however, Bastarache J usefully suggests that the open-textured policy analysis seemingly mandated by Garland must be ‘rooted in the policy considerations that are traditionally found in unjust enrichment cases’. See Kingstreet Investments, n 17 above, para 37. Hopefully, this reminder that the law of restitution and unjust enrichment is a body of existing law that may be expected to provide guidance in future cases in accordance with the traditional methods of the common law will soften the potentially radical impact of the Garland analysis. 122 (1888) 59 LT 636 (QBD). 123 Birks, n 44 above, 183. 124 Woolwich, n 63 above, 166.

16 Towards Understanding Equitable Estoppel TOWARDS UNDERS TANDI NG EQUI TABLE ES TOPPEL

MARK P GERGEN* MARK P GERGEN

T

HIS ES S AY EX AMINES the place of the American doctrine of equitable estoppel in the law of obligations. The American doctrine encompasses much of the fields of estoppel by representation and proprietary estoppel in English law.1 I gather Australians call this common law estoppel.2 American law differs from the rest of the common law world in treating promissory estoppel as a separate field that is a part of contract law. As a consequence, American courts tend to define equitable estoppel by the two features that distinguish it from promissory estoppel. These are the requirements that an estoppel lies only for a misrepresentation of fact, and that an estoppel may only be used as a shield and not as a sword.3 This essay will argue that the key to understanding equitable estoppel lies in its limited remedial techniques. This feature is variously expressed by the maxims that estoppel operates as a shield and not a sword,4 that it Fondren Chair in Faculty Excellence, University of Texas School of Law. P Feltham et al, The Law Relating to Estoppel by Representation (London, LexisNexis, 4th edn, 2004). E Cooke, The Modern Law of Estoppel (Oxford, Oxford University Press, 2000) gives a unified account. 2 A Robertson, ‘Situating Equitable Estoppel Within the Law of Obligations’ (1997) 19 Sydney Law Review 32, 42 note 78. 3 See, eg Mortvedt v State 858 P 2d 1140, 1143 (Alaska 1993) (‘The primary difference between promissory and equitable estoppel is that the former is offensive, and can be used for affirmative enforcement of a promise, whereas the latter is defensive, and can be used only for preventing the opposing party from raising a particular claim or defense’: per Robinowitz CJ); Hortman v Miamisburg 852 NE 2d 716 (Ohio 2006) (adopting Williston’s position that equitable estoppel requires a misrepresentation of fact and contrasting promissory estoppel). 4 See, eg Dickau v Town of Glastonbury 242 A 2d 777, 780 (Conn SC, 1968) (‘equitable estoppel is available only for protection and cannot be used as a weapon of assault’: per Alcorn J); Snyder v City of Minneapolis 441 NW 2d 781, 790 (Minn 1989) ( estoppel ‘does not furnish a basis for damages claims [it] is . . . a shield, not a sword’: per Wahl J); Utschig v McClone 114 NW 2d 854, 855 (Wis 1962) (‘The effect of an estoppel in pais is to prevent the assertion of what would otherwise be an unequivocal right . . . Such an estoppel operates always as a shield, never as a sword . . . [A]nd it does not of itself create new rights’: per Brown J). * 1

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is a rule of evidence,5 that it is not a cause of action6 and that it is available to protect a right but not to create a right.7 While these maxims have fairly been described as nonsense,8 they turn out to be vital nonsense. The techniques of estoppel are available to impose an obligation or to transfer property only when there is a pre-existing legal relationship between the actor and the claimant and the actor misleads the claimant regarding some right, claim or defence the actor could assert within the relationship, or when the actor misleads the claimant regarding the claimant’s right to use the actor’s property. As a consequence, equitable estoppel has not had to be cabined in the ways that negligent misstatement has. As for the principles that best explain when an estoppel will lie, it ought to come as no surprise that the techniques of equitable estoppel are variously used to punish deceit, to allocate losses to the most responsible person, to prevent unjust enrichment and so on. Equitable estoppel has a chameleonlike quality. Its normative colours change with the circumstances. Readers familiar with the work of Peter Birks may think this essay cuts against its grain. Birks was adamant that the law should be organised around causative events and not remedies. He insisted the field is unjust enrichment (the causative event), not restitution (the remedy). Birks’s later work on unjust enrichment brilliantly describes that field in terms that elaborate on the paradigmatic case of a mistaken payment of money. This is teaching of the highest order. Birks systematised much of a notoriously unruly body of law around a paradigmatic case. Birks’s account of unjust enrichment works in both directions. It has rules to resolve cases and an idea of justice to vivify the rules. Sadly, it is impossible to give an account of the causative events of equitable estoppel that is both descriptively accurate and usefully narrow. There is no paradigmatic case of equitable estoppel in the same way we can think of a paradigmatic case of negligence or, taking Birks’s lesson, of unjust enrichment. The techniques of equitable estoppel are used in myriad situations to do intuitive justice in the service of multiple principles. While there are patterns in the law, there are few hard and fast rules. The doctrine is an open invitation to ‘palm tree justice’ checked mostly by remedial technique and judicial conservatism. Despite all of this, I like to

5 This characterisation is more typically English: National Westminster Bank plc v Somer International (UK) Ltd [2002] 1 All ER 198, 212 (CA) (‘There is no doubt that the preponderance of legal authority and judicial dicta at the highest level favours the view that estoppel by representation is a rule of evidence rather than of substantive law’: per Potter LJ). 6 Utschig, n 4 above. 7 See, eg Val-Land Farms Inc v Third National Bank in Knoxville 937 F 2d 1110 (6th Cir 1991)(Tenn law)(Estoppel is available to protect a right but not to create one) 8 See S Williston, ‘Liability for Honest Misrepresentation’ (1911) 24 Harvard Law Review 415, 425; P Atiyah, ‘Misrepresentation, Warranty and Estoppel’ (1971) 9 Alberta Law Review 347, 368–74.

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think this essay is suitable tribute in a volume published in Birks’s memory. Birks saw the law of civil wrongs is in a mess . . . split between the common law of tort and the elusive law of equitable wrongs.9

This essay is a step towards incorporating equitable wrongs in the law of torts. Part I sets the stage by sketching the reach of the doctrine of equitable estoppel. It makes the point that the usual elements—a misrepresentation of fact predictably inducing detrimental reliance—are unreliable limitations, save perhaps for detrimental reliance. Part II explains what I mean by estoppel’s chameleon-like quality. Comparing equitable estoppel with the tort of negligent misstatement, part III argues that estoppel can apply to a broad and vaguely defined set of circumstances because of its limited remedial techniques. Part IV addresses the objection that estoppel’s techniques are an unreliable limit because it often is possible to cast an offensive use of estoppel in suitably defensive terms. It concedes the objection, particularly in the contractual context, but points to a possible answer. The answer is not developed in this essay.

I

E S TO P P E L’ S UN R E L I A B L E E L E M E N T S

Typically, it is said that equitable estoppel requires a misrepresentation of fact predictably inducing detrimental reliance.10 These elements sometimes are treated as if they have real bite, even those that are well known to be unreliable. For example, numerous cases reject claims of estoppel based on a misstatement of intent or a misstatement regarding a future event stating as the reason that estoppel will lie only for a misrepresentation of fact.11 And there are a goodly number of cases that reject estoppel claims on the ground that an estoppel will not lay for silence.12 9 P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon Press, 1997) 23. 10 American Law Institute, Restatement Second, Torts (St Paul, MN, ALI, 1965) §§ 872 and 894 provide for estoppel only in a case of a ‘definite misrepresentation of fact’. Dobbs observes: ‘Equitable estoppel is conventionally regarded as based on acts or words that operate like representations of fact’: D Dobbs, Law of Remedies (St Paul, MN, West Publishing Co, 2nd edn, 1993) § 2.3(5). 11 Ferro v Society of St Pius X, 149 P 3d 813 (Idaho 2006) is a recent example. Ferro sought redress within his church after being slandered by a priest. A priest who took his side assured Ferro that the miscreant priest would be transferred and amends would be made by the church to ‘meet any damages’. Relying on the priest’s assurances, Ferro did not take legal action until it was too late. The trial court allowed the claim holding the church estopped from asserting the statute of limitations as a defence. The Idaho Supreme Court said there could be no estoppel because the misrepresentation was of a future event. 12 These cases invoke the general rule to reject a claim to estop the defendant from asserting a bar to a claim when the defendant did nothing affirmatively to prevent the claimant from

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Nevertheless, it is well established that an estoppel may lie when an actor silently misleads another. In the classic case of Pickard v Sears,13 a mortgagee was estopped from asserting his interest in property against an innocent purchaser when the mortgagee stood by and allowed the sheriff to seize the machine to satisfy the mortgagor’s debt to another creditor. Estoppel by silence sometimes is said to require special circumstances. The Restatement Second, Torts requires that the actor ‘realize’ (that is, actually know) that the claimant ‘is about to do an act’ based on a ‘mistaken belief of fact’ that the actor could easily correct.14 But in other contexts silence is not treated as a special case. The Restatement Third, Property: Servitudes creates a servitude by estoppel when a landowner permits another to use the land when the circumstances would lead the other to believe the permission would not be revoked.15 In this context, the failure to object to an apparent use is taken as an apparent expression of permission. The law of servitudes by estoppel also contradicts the proposition that an estoppel will lie only for a misrepresentation of fact. In the typical case of a servitude by estoppel, if there is a misrepresentation it is of the landowner’s intent that the permission given to use his land be irrevocable. Often in cases of a servitude by estoppel there is not even this much of a misrepresentation, for neither the claimant nor the landowner will have given any thought to whether the landowner has reserved the power to revoke permission to use his land. Consider Geddes v Mill Creek County Club.16 Geddes owned a large parcel of land next to a planned real estate development that was to include a golf course. After Geddes objected, the plans for the development were changed so that a fairway would abut his property, rather than houses or a bicycle path. A fence and trees were added to screen Geddes’s property from the fairway. Geddes came to regret his decision when he learned that golfers frequently hit errant balls. In two seasons, he found over 2,000 golf balls on his property. The cost of redesigning the course to protect Geddes’s property was grossly disproportionate to the harm to Geddes from the errant balls, so you will not be surprised to learn that Geddes was held estopped from bringing a trespass or nuisance claim. It is difficult to find anything that could be characterised as a misrepresentation here. Probably neither the developer nor Geddes realised that in negotiating to have a fairway adjacent to his avoiding the bar: S & H Hardware & Supply Co v Yellow Transport Inc 432 F 3d 550 (3rd Cir 2005) (Pa law) (written notice requirement); Weiss v Rojanasathit 975 SW 2d 113 (Mo 1998) (statute of limitations). (1837) 6 A & E 439 (KB). Restatement Second, Torts, n 10 above, § 894(2). American Law Institute, Restatement Third, Property: Servitudes (Philadelphia, PA, ALI, 1989) § 2.10(1). 16 751 NE 2d 1150 (Ill 2001). Technically this is not a case of a servitude by estoppel because the landowner did not permit another to use his land. I use the case for illustrative purposes because that feature cinches the point for which I am using the case. 13 14 15

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property, Geddes was implicitly giving permission for errant golf balls to land on his property; much less did they consider the question whether this permission was irrevocable. The point holds outside the law of servitudes. A liability insurer who undertakes to defend a claim with knowledge of a ground for denying coverage will be estopped from later denying coverage on that ground.17 An actor may be estopped from exercising a power to terminate a contract for failure of a condition if the actor leads the claimant to believe the power will not be exercised.18 The case of Phyfer v San Gabriel Development Corp19 is a striking example. A mineral interest owner was estopped from terminating a mineral lease after the lessee violated important covenants because the owner delayed while a successor to the lessee invested substantial amounts developing the lease. What is striking about the case is that the mineral interest owner had raised the possibility of termination with the successor and had expressly reserved its right to terminate while negotiating terms of a successor lease. Usually an express reservation of a right will avoid estoppel. If we were going to be candid, then, we would recognise that sometimes an estoppel will lie to prevent an actor from altering a course of action or a decision because of a claimant’s reliance on the action or decision. This is a difficult proposition to embrace for it runs against the grain of contract law, which preserves the freedom to change one’s mind by binding an actor to a course of action or to a decision only if the actor expressly and definitely commits himself to it. Further, as the law now stands, the maxim that estoppel will lie only for a misrepresentation of fact and the maxim that estoppel can be only a shield and not a sword supply courts with easy grounds to dispose of estoppel claims, without regard to the equities of the claim, when a claimant suffers a reliance loss as a result of an unexpected termination of an open-ended relationship. If we dispense with the first maxim, then we may place more pressure on the second than it can bear. I will come back to these points. By many accounts, detrimental reliance is the one sure requirement for equitable estoppel. Elizabeth Cooke calls it ‘the pervasive condition for estoppel—the invariable ingredient of unconscionability’.20 Generally, an 17 General Tire Co v Standard Accident Insurance Co 65 F 2d 237 (8th Cir 1933) (Minnesota law) (insurer is estopped for declining coverage though policy excluded coverage for non-commercial use of vehicle when the insurer undertook to defend the claim knowing the vehicle had been so used without reserving power to decline coverage). Numerous other cases to similar effect are collected in 38 ALR 2d 1148. 18 Mahban v MGM Grand Hotels Inc 691 P 2d 421 (Nevada SC, 1984). 19 884 F 2d 235 (5th Cir 1989) (Mississippi law). Similar cases but without an express reservation of right include Young v Amoco Production Co 610 F Supp 1479 (ED Tex 1985) aff’d, 786 F 2d 1161 (5th Cir 1986) (Tex law); Vickers v Peaker 300 SW 2d 29, 34 (Ark 1957); Tenner v Carmack 181 SW 2d 455, 457 (Ky 1944). 20 Cooke, n 1 above, 88.

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estoppel will lie only if (and to the extent21) it is necessary to put the claimant in no worse position than the claimant would have been in had the claimant not been misled by or not relied on the actor.22 Often there must be a showing of pecuniary harm.23 This is not always necessary. Sometimes a sacrifice of a right or an interest of immeasurable or non-pecuniary value is sufficient.24 An example is a case holding a man to be a parent by estoppel because by holding himself out as his children’s father he prevented them from developing bonds of affection with their natural father.25 A self-evident explanation of such cases is that the lost right or interest is of such a nature that its loss is considered detrimental without proof of pecuniary harm. But even the element of detrimental reliance is not completely reliable. An estoppel may lie to prevent an actor from reaping an advantage from consciously deceitful conduct with little or no showing of actual harm.26 This is unsurprising for it corresponds with the law of deceit, which provides redress when there is a mere possibility of harm. This is an example of estoppel’s chameleon-like quality—the doctrine’s coloration changes with the circumstances. It also raises the question of the relevance of fault in equitable estoppel. I turn to that question now.

21 This issue was squarely confronted in National Westminster Bank plc v Somer International (UK) Ltd [2002] 1 All ER 198 (CA). The claimant bank mistakenly credited $76,708.57 to the defendant’s account and sent a communication to the defendant stating that an expected payment had been received. Relying on this communiqué, the defendant disbursed £13,180.57, which was lost. The defendant raised an estoppel defence to the claimant’s restitution claim and argued that, as estoppel operated as a rule of evidence, the claimant could recover nothing because it could not contradict the communiqué. The Court of Appeal reached the sensible result. 22 Jim Henson Productions Inc v John T Brady & Associates Inc 867 F Supp 175 (SD NY 1994) nicely illustrates the point. The claimant argued that Henson Productions was estopped from asserting its rights to two muppets because the claimant had been led to believe it could use the muppets and had used the muppets in its advertising for a number of years. The court refused the estoppel claim noting that the claimants could not establish that it had good will tied up in customer recognition of the muppets and that the claimant did not have an ongoing project in which it had made an investment that required use of the muppets. 23 Heckler v Community Health Services of Crawford County Inc 467 US 51 (USSC, 1984). 24 Another example is when a liability insurer assumes defence of a claim when the insurer knows there is a basis for declining coverage. Most cases hold that the insured need not establish that it probably would have fared better had it controlled defence of the claim. Loss of the opportunity to control defence suffices: National Sun Industries Inc v South Dakota Farm Bureau Insurance Co 596 NW 2d 45 (SD 1999); Burt Rigid Bo Inc v Travelers Property Casualty Corp 302 F 3d 83 (2nd Cir 2002) (New York law). 25 W v W 779 A 2d 716 (Conn 2001). Some cases require financial detriment by requiring a showing that but for the actor’s conduct the children would have been able to obtain support from their natural parent: Miller v Miller 478 A 2d 351 (NJ 1984); Murphy v Murphy 714 A 2d 576 (RI 1998). 26 Palmer v Borg-Warner Corp 838 P 2d 1243 (Alaska 1992).

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T H E M O RA L F R A M E WO R K O F E S TO P P E L

This part makes a simple point that I would have thought self-evident were it not so often overlooked. The point concerns the moral framework of the law of equitable estoppel—or, as Elizabeth Cooke puts the question, what considerations make it unconscionable for an actor to go back on a representation?27 The unsurprising answer is that the considerations that justify estopping an actor from asserting a fact, right, claim or defence are the same considerations that justify imposing an obligation on an actor in cognate departments of private law. The techniques of estoppel are used to punish fraud, to cast a loss on an actor whose unreasonable conduct caused the loss, to avoid unjust enrichment and so on. It would be surprising were it otherwise. Perhaps one reason this point is overlooked is that there is a natural tendency to try to state principles of estoppel in terms that resemble others principles of law. As estoppel often is fault-based, there is a natural tendency to state the moral quality of conduct that warrants estoppel in terms that parallel tort law. Some authorities (particularly older authorities) insist that estoppel checks ‘fraud and falsehood’.28 Some require deceit or gross negligence.29 Some require culpable negligence.30 Some treat a misrepresentation that was honest and non-negligent as a basis for estoppel if the actor intended, or at least expected, the other would act on the misrepresentation.31 Some authorities say that an honest and non-negligent misrepresentation may be a basis for estoppel if the actor could foresee the other would act on the misrepresentation.32 On the other hand, the Restatement Second, Torts takes the position, when it comes to estopping an actor from asserting a tort claim, that ‘it is immaterial whether the [actor] exercised due care in making the statement’ that misled the claimant.33 It turns out there is an element of truth in all of these formulae—fault is relevant but not required for estoppel and sometimes the degree of an actor’s fault matters. In particular, when an estoppel lies against an actor who innocently misleads another, the estoppel often can be explained on Cooke, n 1 above, 84–117. This is from a leading American case, Dickerson v Colgrove 100 US 578, 580 (USSC, 1879). 29 In re Cancellation of Stabio Ditch Water Right on Spearfish Creek 417 NW 2d 391 (SD 1987). 30 St Joseph’s Hospital and Medical Center v Reserve Life Insurance Co 742 P 2d 808 (Ariz 1987); Northwestern National Bank v Commonwealth 27 A 2d 20 (Pa 1942). 31 Boesiger v Freer 381 P 2d 802 (Idaho 1963); Geddes, n 16 above; Seidel v 18 East 17th Street Owners Inc 598 NE 2d 7 (NY 1992); Jennings v Dunning 440 NW 2d 671 (Neb 1989); Burdick v Independent School District No 52 of Oklahoma County 702 P 2d 48 (Ok 1985). 32 Vu v Prudential Property & Casualty Insurance Co 33 P 3d 487 (Cal 2001); Bean v Steuart Petroleum Co 224 A 2d 295 (Md 1966). 33 Restatement Second, Torts, n 10 above, § 894 Comment b. 27 28

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the ground that the actor would be unjustly enriched at the claimant’s expense were the actor to be allowed to assert the fact, right, claim or defence that is the subject of the estoppel.34 This is unsurprising for the law of unjust enrichment will reverse a mistaken transfer even though the beneficiary is faultless. A variation on an illustration in the Restatement Second, Torts shows how the techniques of estoppel are used to avoid unjust enrichment when an actor innocently misleads the claimant.35 Relying on an erroneous survey, A mistakenly places a boundary fence inside his property. Relying on the fence as marking the boundary, B builds a structure encroaching on A’s property. In this situation, A will be estopped from asserting a trespass claim to obtain an injunction to compel B to remove the encroaching structure. However, A will be allowed to recover damages for the value of the property lost to the encroachment. The principle opposing unjust enrichment is the best explanation of this pattern of results. If A were given the power to compel B to remove the encroaching structure, then A could extract a price from B in excess of the actual value of the land lost to the encroachment. The upper limit on what A could demand is the cost to B of moving the structure. Armed with an injunction, A would reap a windfall at B’s expense as a result of B’s mistake. The award of damages for the land lost to the encroachment prevents B from benefiting at A’s expense. It is difficult to find explicit authority for the proposition that an estoppel will lie against an innocent actor to prevent unjust enrichment.36 The point that an estoppel may lie to avoid unjust enrichment sometimes is expressed in cases that estop a landowner from asserting a claim or title when the landowner stands by while another constructs an improvement on his land.37 These cases recognise that an actor has a greater duty to 34 The point that estoppel is used to avoid unjust enrichment has been made regarding proprietary estoppel: R Halson, ‘The Offensive Limits of Promissory Estoppel’ [1999] Lloyd’s Maritime and Commercial Law Quarterly 256, 275. 35 Restatement Second, Torts, n 10 above, § 894 Illustration 1. In the illustration, A mistakenly locates a fence leading B to believe timber is on his land. B cuts the timber. B is liable for whatever profit he made from cutting the timber but is not otherwise liable for the trespass. Mannillo v Gorski 255 A 2d 258 (NJ SC, 1969) is authority for giving a damages remedy but not an injunction. Mannillo did not involve estoppel as the landowner did nothing to induce the other’s mistake. The court denied the injunction and limited the remedy to the fair value of the land to avoid an undue burden. 36 What may seem the clearest expression of the point is in a New York case stating: ‘A party may not, even innocently, mislead an opponent and then claim the benefit of his deception.’ Triple Cities Construction Co v Maryland Casualty 151 NE 2d 856, 858 (NY 1958) (per Fuld J). I am unaware of a case where the principle was necessary to the outcome. 37 Jaworski v Jaworski 95 A 2d 95, 95 (Md 1953) (‘One cannot stand by and see another make expenditures for improvements to property to which he has, or later asserts, some claim or title and not give any notice or objection, without losing his right in good conscience in equity to assert his own claim or title against the improvements’: per Hammond J); Franksen v Crossroads Joint Venture 515 NW 2d 794 (Neb 1994). In Ramsden v Dyson (1866) LR 1 HL 129, 140 and 168 (HL), Lords Cranworth and Wensleydale decry a landowner purposefully

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speak to correct another’s mistaken belief when this will forestall an action that would enrich the actor at the other’s expense. But they are not direct authority for the proposition that an actor who is faultless may be estopped to avoid unjust enrichment. Other indirect authority for the proposition may be found in cases that hold that an estoppel will lie to cast a loss on an actor only when the actor was negligent in misleading the claimant.38 But one has to read into this the implicit proposition that an estoppel will lie absent negligence to avoid unjust enrichment. Perhaps the best authority for the proposition comes from a related doctrine, innocent misrepresentation, where it is well established that the law reverses a transaction that is induced by an innocent misrepresentation to avoid unjust enrichment. We see a similar shiftiness when it comes to the definition of the moral quality of conduct by a claimant that will preclude estoppel. If often is said that an estoppel will not lie when a claimant’s reliance on a misrepresentation is unreasonable.39 This generally is correct when an actor’s conduct in misleading the claimant is no worse than negligent. On the other hand, when an actor knowingly misleads the claimant (or, even worse, purposefully deceives the claimant for his own gain) an estoppel will lie even though the claimant’s reliance was negligent. Two illustrations from the Restatement Second, Torts explicitly make the point. In both, A represents to B that A’s car in C’s possession is owned by C. B unreasonably relies on the representation to purchase the car from C. A is estopped from asserting his title to the car when the misrepresentation is intentional and made realising B might purchase the car from C relying on it.40 A is not estopped if the misrepresentation is inadvertent and not done with an standing by hoping to profit from another’s mistake. Bean v Steuart Petroleum Co 224 A 2d 295 (Md 1966) comes close to making the point for it invokes the principle in Jaworski as a basis for estoppel while conceding there as no possible claim that the parties subject to the estoppel had acted in bad faith. Action Mechanical Inc v Deadwood Historic Preservation Commission 652 NW 2d 742 (SD 2002) is authority for the converse point that a contractor asserting a lien will not be estopped when the estoppel would cause the defendant to be unjustly enriched at the actor’s expense. 38 Societe Generale v Federal Insurance Co 856 F 2d 461 (2nd Cir 1988) (New York law). The case holds that a carrier may not be equitably estopped from denying the validity of bills of lading it issued that were used to defraud a creditor absent a showing that the carrier had failed to use due care. St Joseph’s Hospital, n 30 above, holds that a health insurer may be estopped from denying coverage when it misrepresented to a health care provider that services were covered when the misrepresentation was negligent. 39 If the law of estoppel tracked the law of unjust enrichment, then negligence by a claimant would not preclude estoppel to avoid unjust enrichment. There are cases that may be best explained on this basis. Geddes, n 16 above, is one. The error in that case was the failure to anticipate that the location of the fairway would result in errant balls frequently landing on Geddes’s land. It is fairly easy to make the case that this was negligent on the part of the developer or its agent, the course designer. But the issue of the developer’s negligence was never broached. The most that can be said in this and similar cases is that courts tend not to look for negligence by a claimant when estoppel avoids unjust enrichment. 40 Restatement Second, Torts, n 10 above, § 894 Illustration 5.

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intent to mislead B.41 This aspect of the law of equitable estoppel corresponds with the rule in the law on fraud or deceit that contributory negligence is not a defence. There is authority for the broader proposition that, for purposes of estoppel when an actor intentionally misleads the claimant, principles from the law of fraud determine causation as well as the effect of a claimant’s unreasonable reliance.42 I am making a fairly modest point here. It is merely that across much of the law of estoppel the considerations that warrant estoppel are the same considerations that warrant imposing an obligation in tort law, particularly the law of negligence and fraud, or that warrant imposing an obligation in the law of unjust enrichment. The techniques of estoppel sometimes are used to serve principles or goals in other departments of law. It should come as no surprise that an actor’s conduct in response to a breach of contract that is a reasonable effort to mitigate damages will not be treated as a basis for estopping the actor from asserting rights arising out of the breach.43 And the law of parent by estoppel is best understood as a body of law unto itself where the best interests of the child are of supreme importance.44 One significant strand in the law of estoppel does seem to stand apart. It plainly belongs in those parts of estoppel that resemble tort law, but it reaches a result that is inconsistent with tort law. Under tort law, liability is imposed without fault only in special situations that have no clear parallel in the law of estoppel.45 Not so in the law of equitable estoppel. There is a class of cases where it is fairly well established that an estoppel will lie to hold an actor responsible for a loss without a finding of negligence. This is under what sometimes is labelled the ‘two innocents rule’46 or the ‘doctrine of comparative innocence’.47

Ibid, Illustration 4. Palmer v Borg-Warner Corp 838 P 2d 1243 (Alaska 1992). For explicit recognition of the point, see McElroy v B F Goodrich 73 F 3d 722, 724 (7th Cir 1996) (declining to find waiver or estoppel where the actor ‘was simply making the best of a bad deal—and incidentally mitigated his damages’: per Posner J). This point was unnecessary to reach the result for the court goes on to find the plaintiff’s claim of default was unfounded. 44 I am thinking in particular of cases where a man who is misled into believing children are his own is held to be a parent by estoppel to preclude him from disavowing a child support obligation after he learns of the truth: Shondel J v Mark D 853 NE 2d 610 (NY 2006). The topic of parent by estoppel is addressed generally in American Law Institute, Principles of the Law of Family Dissolution (Newark, NJ, LexisNexis, 2002) § 3.03. 45 Strict liability is imposed when an actor’s conduct creates non-reciprocal risks, or for administrative or policy reasons. On the general requirement of fault and an argument for strict liability when conduct creates non-reciprocal risks, see G Fletcher, ‘Fairness and Utility in Tort Theory’ (1972) 85 Harvard Law Review 537. The administrative reasons generally have to do with the difficulty of monitoring an actor’s conduct and determining the appropriate level of care. The policy reasons generally have to do with loss-spreading. 46 Lubbock Feed Lots Inc v Iowa Beef Processors Inc 630 F 2d 250 (5th Cir 1980)(Texas law). 47 Stohr v Randell 505 P 2d 1281 (Wash 1983). 41 42 43

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The rule applies when one of two (or more) innocent persons must suffer a loss as a result of a fraud committed by a third person.48 The loss is cast on the party who is most responsible for allowing the fraud to be perpetrated. The case of Jacobs v Chicago Title Insurance Co49 illustrates this. All of the parties to a real estate closing agreed to use a single settlement attorney (Kapnistos), who misappropriated the funds (and died) after recording the deed of trust and falsely certifying that the outstanding mortgages had been paid. There were predictable claims and counterclaims to resolve who would be left holding the bag. The court found ‘all parties were innocent of any reasonable apprehension that Kapnistos would prove dishonest’. Rather than leaving the chips to fall where they may under the documents, contract law and property law, the court cast the loss on the title insurer and the purchaser’s mortgagee, finding they were most responsible: the title insurer because it had ‘specifically approved’ Kapnistos and the purchaser’s mortgagee because it was in the best position to monitor Kapnistos. Jacobs and similar cases are an oddity in the law of estoppel (and in private law more generally) in that they impose liability for harm without finding fault. The rule applied in Jacobs is atypical in another respect. The rule encompasses the one situation in American law where equitable estoppel will yield a direct damages award without regard to whether the award is sustainable by the usual remedial techniques.50 In other respects, Jacobs is the quintessential equitable estoppel case. The doctrine of equitable estoppel did not bring the parties to court—the law was going to determine who was going to be left holding the bag. The doctrine supplied a simple equitable principle to resolve the dispute. And, presumably, it did 48 The doctrine has been superseded within much of its traditional field. This is illustrated by the case most frequently cited as authority for the doctrine, National Safe Deposit S & T Co v Hibbs 229 US 391 (USSC, 1913). K deposited endorsed stock certificates with a bank as security for the loan. M, a long-time and trusted bank employee, took the certificates to a broker, H, who sold them on a stock exchange, paying the proceeds to M. The bank sued H for conversion of the certificates. The loss was cast on the bank because its misplaced trust in M made the loss possible. This type of problem now generally is resolved by rules in the law of negotiable instruments and sales law that protect a bona fide purchaser. The doctrine occasionally still is invoked in cases that fall outside these rules. One such case is Kimberly & European Diamonds Inc v Burbank 684 F 2d 363 (6th Cir 1982) (Ky law). P deposited a diamond it owned with B, who transferred the diamond to N (disclosing he did not own the diamond), who gave the diamond to D as security for a loan. The loss was cast on D because he had reason to distrust N. See also Bunge Corp v Manufacturers Hanover Trust Co 286 NE 2d 903 (NY 1972) (applying the doctrine over a strong dissent that the law on negotiable instruments dictated a different result). 49 709 F 2d 3 (4th Cir 1983) (Va law). Another recent case invoking the doctrine includes Olson Distributing Systems Inc v Glasurit America Inc 850 F 2d 295 (6th Cir 1988) (Michigan law) (casting loss on carrier when middleman did not pass on money paid by shipper where carrier acted in a way that led shipper to believe it had been paid). 50 Restatement Second, Torts, n 10 above, § 872 (‘Tort Liability Based on Estoppel’) was meant to supply a damage action in tort on estoppel in a related situation. It has been cited twice by courts but never on the relevant point.

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this in a way that did not subvert the agreed allocation of risks or relevant principles of contract and property law. We can presume this because this situation was not imagined by whoever drafted the relevant documents and is not addressed by contract and property law.

III

‘A S H I E L D B U T N OT A S WO R D ’

That the breadth of the ambit of equitable estoppel has something to do with the doctrine’s limited remedial techniques is well known. Others have remarked on the historical connection.51 After it was settled (at least for a while) that there was no liability in tort for a non-fraudulent misrepresentation,52 the seeming incongruity of legal consequences attaching to a non-fraudulent misrepresentation through estoppel was explained away by describing estoppel as a rule of evidence and not a cause of action.53 In this part, I argue that there also is a normative connection. Again, my point is fairly modest and, I believe, fairly obvious, though it has gone largely unnoted. My point is that equitable estoppel can apply to a broad and vaguely defined set of circumstances because of its limited remedial techniques. I compare equitable estoppel with the tort of negligent misstatement to make the point. The two doctrines bear comparison for they share the core elements of detrimental reliance on a misrepresentation. Liability for negligent misstatement has had to be cabined on several dimensions. Liability is not imposed when inaccurate information is negligently supplied on a casual basis or as a by-product of an action done by the actor for a purpose other than advising the claimant.54 Liability is not imposed when it would expose an actor to a risk of indeterminate liability.55 And liability is not imposed for misstatements regarding the actor’s contract with the claimant or regarding a prospective contract between the actor and the claimant.56 The limited remedial techniques of estoppel allay all but the last concern. Cooke, n 1 above, 19–25 is a particularly good review of the history. Derry v Peek (1889) 14 App Cas 337 (HL). Low v Bouverie [1891] 3 Ch 82 (CA). M Gergen, ‘The Ambit of Negligence Liability for Pure Economic Loss’ (2006) 48 Arizona Law Review 749 (2006). For an effort to put this in black letter form, see American Law Institute, Restatement Third, Economic Torts and Related Wrongs, Council Draft No 1 (Philadelphia, PA ALI, 2004) § 9. 55 In America, the classic expression is by Cardozo J in Ultramares Corp v Touche 174 NE 441, 444 (NYCA, 1931). In Canada and Australia, this takes the form of a requirement of ‘proximity’: Canadian National Railway v Norsk Pacific Steamship Co [1992] 1 SCR 1021 (SCC); Cooper v Hobart [2001] 3 SCR 537 (SCC); Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR 515 (HCA). 56 For an effort to put this in black letter form, see Restatement Third, Economic Torts and Related Wrongs, n 54 above, § 11. The Reporter’s Note collects case authority. 51 52 53 54

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Because of its remedial techniques, indeterminate liability simply is not a possibility with equitable estoppel, so there is no need for such a limitation. The remedial techniques of equitable estoppel also limit the scope of an actor’s liability, largely eliminating the need for rules of that sort. The case of Snyder v City of Minneapolis57 illustrates this. The City mistakenly issued a permit allowing Snyder to build a new building on his property. Relying on the permit, Snyder tore down an existing building. The City realised its error and refused to allow construction. In the meantime, Snyder had lost financing. Assume this was for reasons independent of the lack of a permit. If we imagine this as a negligence claim—say a lawyer negligently advises Snyder that a permit is unnecessary for the new building—it raises a difficult scope of liability problem since the loss from being unable to rebuild is partly attributable to the loss of financing, and the lawyer was not negligent with regard to that risk. A claim of equitable estoppel raises no such issue, for the City’s obligation is no more than to honour the permit. The limited remedial techniques of equitable estoppel also reduce the need for rules that preclude negligence liability when inaccurate information is supplied by an actor on a casual basis or as a by-product of an action done for a purpose other than advising the claimant. To capture these aspects of the doctrine, drafts of the Restatement Third, Economic Torts and Related Wrongs propose a rule that an actor has a duty of care in supplying information to another only if the actor reasonably appears to invite the other to attach significant importance to the information in making a decision.58 There is no such limitation on equitable estoppel. That an actor appeared to intend to invite a claimant to rely on information is a relevant consideration in determining whether estoppel is warranted, but it is not a prerequisite for estoppel. Vu v Prudential Property & Casualty Insurance Co59 shows how the limited remedial techniques of estoppel indirectly serve the purposes of the requirement for negligence liability of invited reliance. Vu was a homeowner whose property suffered minor visible damage after an earthquake. An individual, call him Z, examined Vu’s house and opined that there was no structural damage. As a result Vu decided not to file a claim against Prudential because the visible damage was less than the policy’s $30,000 deductible. More than a year after the earthquake Vu discovered substantial structural damage that cost far in excess of the deductible to repair. By then it was too late to file a claim under the policy’s one year claim period. If Z was a friend or relative giving Vu casual advice, then Z 441 NW 2d 781 (Minn 1989). Restatement Third, Economic Torts and Related Wrongs, n 54 above, 9(3)(b). The principle is suggested by S Perry, ‘Protected Interests and Undertakings in the Law of Negligence’ (1992) 42 University of Toronto Law Journal 247. 59 33 P 3d 487 (Cal 2001). 57 58

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would not be liable for negligent misstatement.60 If Z was an engineer who was employed to inspect the house for a potential purchaser or a lender, that is, for a purpose other than advising Vu, then Z would not be liable to Vu for negligent misstatement.61 But Z was a Prudential adjuster. So Prudential was estopped from asserting the one year claim period as a bar to a claim because of the adjuster’s misrepresentation of the amount of damage. There are several reasons why negligence liability would not imposed in Vu’s case if Z were a friend giving casual advice or if Z supplied the information as a by-product of an undertaking to serve someone other than Vu. It is thought unfair to impose liability on a gratuitous undertaking and it is thought that people ought to be held responsible for their own decisions. Drafts of the Restatement Third, Economic Torts and Related Wrongs suggest another reason—the law errs on the side of under-protecting people from negligent conduct when it results in solely pecuniary harm.62 When information is supplied on a casual basis or as a by-product of an undertaking to serve another, the circumstances raise questions about what is the appropriate level of care owed by the information supplier to the claimant, whether the claimant acted reasonably in relying on the information and what significance the information played in the claimant’s decision resulting in the loss. While no doubt some claims of liability would be good under general principles of negligence law even in these circumstances, there is a per se rule of no liability because, once administrative costs and the risk of error are considered, it is not worth winnowing out the good claims from the bad.63 The limited remedial techniques of equitable estoppel indirectly serve the purposes of a rule limiting negligence liability to cases where an information supplier invites the claimant’s reliance. The universe of possible claims is reduced to situations where the techniques are available to redress detrimental reliance. Generally, the techniques will be available only when there is a pre-existing legal relationship between the actor and the claimant and the misrepresentation relates to some right, claim or defence the actor could assert within the relationship, or when the misrepresentation relates to the claimant’s use of the actor’s property. The absence of a pre-existing legal relationship means there is no possible 60 See, eg Gordinier v Aetna Cas & Sur Co 742 P 2d 277 (Ariz 1987) (no liability for mistaken kitchen table advice). 61 Gergen, n 54 above, 756 note 24 collects the cases. 62 Restatement Third, Economic Torts and Related Wrongs, n 54 above, § 8, Comment e. This does not explain why the law ought to err on the side of under-protecting people from unreasonable conduct causing solely pecuniary harm. One explanation is that pecuniary interests are morally less deserving of protection than personal interests. See B Feldthusen, Economic Negligence (Ontario, Carswell, 4th edn, 2000) 12. A related explanation emphasises the desirability of preserving freedom of action insofar as conduct affects pecuniary interests. 63 The fact that doubtful claims would have to be resolved by a jury in America reinforces this judgment because this increases litigation costs and may increase the risk of error.

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equitable estoppel claim if Z gave Vu advice as a friend or as a by-product of an undertaking to serve someone other than Vu. When the techniques of estoppel are available, the circumstances that make them available generally strengthen the case for imposing negligence or strict liability when a claimant incurs a loss after being supplied by an actor with inaccurate information. A Prudential adjuster should expect Vu to attach substantial weight to his low estimate of property damage in deciding not to file a claim against Prudential. Indeed, strict liability may be justified in the case because the error benefits Prudential. I think this suffices to answer one objection to the maxims that estoppel is a rule of evidence, a shield and not a sword, and so on. The objection is that the maxims are descriptively inaccurate because the effect of estoppel is to create an obligation or to effect a transfer of property rights that would not result but for the estoppel.64 The objection misconceives the import of the maxims. They are not meant to deny that estoppel can create an obligation or transfer property rights. That would be silly. The maxims express in different ways the point that estoppel may create an obligation or transfer property rights only when this can be accomplished using its limited remedial techniques. Another, more significant objection remains. I turn to it now.

IV

T H E M A L L E A B I L I T Y O F E S TO P P E L’ S T E C H N I QU E S

Estoppel’s limited remedial techniques are an unreliable limit insofar as it is possible to recast an offensive use of estoppel in acceptably defensive terms. I will call this the malleability objection. Before I can address this objection—which is serious—let me clarify what I mean by the remedial techniques of estoppel. When the basis for estoppel is a misrepresentation of fact, an actor may be estopped from asserting a fact that is inconsistent with the representation. An actor also may be estopped from asserting a right, claim or defence if the claimant’s action in reliance on the misrepresentation created the right, claim or defence.65 When the basis for estoppel is conduct lulling the claimant into believing that an actor would not assert a right, claim or defence, the actor may be estopped from asserting that right, claim or defence. 64 Williston, n 8 above, 425. Patrick Atiyah’s objection to the maxim that estoppel is not a cause of action goes to the infelicity of the particular maxim: n 8 above, 368–70. 65 Restatement Second, Torts, n 10 above, § 894 uses a different formula: an actor may be estopped from asserting a tort claim if the claimant’s conduct would not have constituted a tort had the actor’s misrepresentation been true. This formula does not work in cases like Vu v Prudential Property & Casualty Ins Co 33 P 3d 487 (Cal 2001), where an actor misleads the claimant into believing there is no basis for a claim and so lulls the claimant into not filing until the time for filing the claim has lapsed.

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Most of the slipperiness in defining what is and what is not a proper use of estoppel occurs in cases where an actor misleads a claimant about the existence or contents of the actor’s contract with the claimant. The ways in which estoppel can be stretched are well known. Textbook illustrations are waypoints in the evolution of the American doctrine of promissory estoppel. One way is to characterise a misstatement regarding the existence or contents of a contract as a misrepresentation of fact. The case of Goodman v Dicker66 is a textbook example. A franchisor was estopped from denying an obligation to a franchise applicant because it had sent a communication misstating that the franchise had been granted. Another way is to supply an essential factual element for a claim by estopping an actor from denying the fact. Kearns v Andree67 is a textbook example of this. A vendor of a house made changes requested by a purchaser who breached. The vendor had no claim on the contract because it was deemed fatally indefinite. The vendor was allowed to recover on a restitution claim by estopping the purchaser from denying the changes were of value to it. A third way is to supply an essential legal element for a claim by estopping an actor from asserting the absence of that element, as exemplified by Ricketts v Scothorn.68 A grandfather gave a note to his granddaughter that paid sufficient interest to enable her not to work. The executor of the grandfather’s estate tried to stop paying interest but was estopped from asserting the absence of consideration. One could argue that Ricketts is not an appropriate use of the techniques because the grandfather made no representation regarding his intent to honour the note notwithstanding the absence of consideration,69 but this is too fine a distinction. It is also difficult to square with the cases discussed earlier that hold that an estoppel sometimes will lie to prevent an actor from changing a course of action or a decision.70 Often in these cases the misrepresentation is tacit—an actor’s failure to assert a legal prerogative is treated as a representation that the actor would not assert that prerogative. One could draw the further distinction that in those cases the course of action or decision involved the non-assertion of a right, claim or defence, but this leads to quibbling about what is an affirmative element of an obligation and what is a defence. In addition, a rule that would permit estoppel only if an actor makes an affirmative misstatement regarding a defence ends up drawing bizarre distinctions. For example, the rule would estop an actor from asserting the statute of frauds as a defence to a contract only if the actor affirmatively represented that a contract had 169 F 2d 684 (DC Cir 1948). 139 A 695 (Conn 1928). 77 NW 365 (Neb 1898). A similarly technical objection could be made about Kearns for the vendee made no representation regarding the value to him of the requested changes. 70 See text and notes accompanying nn 16–19 above. 66 67 68 69

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been signed.71 This fact is coincidental to the reasons for allowing a claimant who incurs a loss in reliance on an oral agreement to recover that loss notwithstanding the statute of frauds. The slipperiness of estoppel’s techniques has not been much of a problem outside the contractual context. If we ask why this is so, the answer suggests a source of the malleability objection in the contractual context and directs us to a possible solution. Contrast two cases. W v W72 is a case of parent by estoppel. A child was born of P and D while they lived together out of wedlock. P told D the child might not be his, but they agreed the child should bear his surname and that the child would not be paternity tested. Eventually they married and had another child. When they divorced D denied a support obligation to the first child, who indeed was not his biological child. The court held D was a parent by estoppel. Ypsilanti Township v General Motors Corp73 is another case of disappointed expectations. In 1984 and 1988, Ypsilanti granted substantial tax breaks to GMC to keep GMC from closing a plant in town. In return, a GMC official publicly pledged that GMC would ‘continue production and maintain continuous employment’. Alas, in 1991, GMC announced plans to shut the plant and move operations to Texas. A Michigan trial court enjoined the plant closure, invoking the doctrine of promissory estoppel. The Court of Appeals reversed this decision, reasoning that there was no ‘clear and definite promise’, which it said was necessary for a promissory estoppel claim. Why does equitable estoppel reach W v W while the claim in Ypsilanti Township was so far beyond the pale that a sympathetic trial judge did not even try to use it? There is more in the way of detrimental reliance in Ypsilanti Township. Moreover, there is a good case to be made that the inconsistency in GMC’s conduct is worse than the inconsistency in the father’s conduct. When D agreed to act as the natural father of P’s first child he almost certainly assumed his relationship with D would last. While this is an unrealistic assumption, it is nearly universal. Given this psychology, it is difficult to imply in D’s conduct a representation that he would continue to act as the child’s father if he and P separated and P took custody of the child. GMC, on the other hand, pledged to keep the Ypsilanti plant open knowing the plant’s future was uncertain. Estoppel reaches W v W because once D was estopped from denying the fact of his fatherhood of P’s first child family law was available to define the legal consequences. No similar body of law lies in the background in Ypsilanti Township. Because of the axiom that estoppel may serve as a 71 Some American states limit promissory estoppel in essentially this way by requiring a promise to put the contract in writing: ‘Moore’ Burger Inc v Phillips Petroleum Co 492 SW 2d 934 (Tex 1972); Stearns v Emery-Waterhouse Co 596 A 2d 72 (Me 1991). 72 728 A 2d 1076 (Conn 1999) and 779 A 2d 716 (Conn 2001). 73 506 NW 2d 556 (Mich App 1993).

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shield but not as a sword, the doctrine can only operate interstitially within another body of law where legal results can follow by estopping an actor from asserting a fact that bears on an actor’s rights or obligations within that body of law, or from asserting a right, claim or defence that the actor has under that body of law. The limited remedial techniques of estoppel are not a reliable limit on the doctrine’s reach in the contractual context because contract law supplies a backdrop of rules in which those techniques can arguably come into play. The malleability objection need not be fatal if we understand the fallibility of the remedial techniques as a limitation. Once a claim of estoppel can be made to seem suitably defensive, a court must ask whether allowing the claim would stultify the policies of the body of law on which the fact bears or that is the source of the right, claim or defence. Occasional cases grasp this nettle. An example is an explanation of why an incorrect denial of an insurance claim is not a basis for estopping the insurer from asserting a limitation period as a defence. While an incorrect denial is a form of a misrepresentation (and it is literally a misrepresentation if it is on inaccurate factual grounds), and the claimant predictably relies on the stated grounds in not pursuing the claim, there is no estoppel in this situation. The reason is that it would stultify the limitation period.74 More often courts dodge the issue, though it would seem to be squarely before them. Potesta v US Fidelity & Guaranty Co75 illustrates this. It explores part of the most difficult line to draw in equitable estoppel, which is to define when estoppel will provide a remedy for misleading conduct in contract formation or performance. The specific question raised by the case is whether a liability insurer who initially declines coverage of a claim on a ground that is later determined to be invalid waives or may be estopped from asserting a later discovered valid ground for denying coverage. A federal court could not ascertain the law of West Virginia so it certified questions to the state supreme court. Because the state court tried to give a full response, its response raises as many questions as it answers. As a general matter, we are told, an estoppel (and waiver) will not lie to expand the scope of coverage: it will lie to bar an insurer from invoking a technical basis for declining coverage (such as a failure to give notice) when waiver or estoppel avoids forfeiture. The court then laid out three exceptions where it said estoppel (but not waiver) could be used to expand the scope of coverage. The first is where an insurer or its agent misrepresented the scope of coverage at the inception of the policy. The second is where a liability insurer undertakes a defence knowing of grounds for declining coverage without a reservation of rights. The third is where the insurer acts in bad faith. The court added there may be other exceptions. 74 Vu v Prudential Property & Casualty Insurance Co 33 P 3d 487 (Cal 2001) makes this point. 75 504 SE 2d 135 (W Va 1998).

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The court should be applauded, for it does not pretend that this pattern of results follows from the axiom that estoppel may be used as a shield but not a sword. But one looks in vain for an explanation of the principles from which it does follow. Even to begin to give a satisfactory account of the relationship of equitable estoppel to contract would take a great deal of time and is unnecessary to make the point I wish to make here, which is that when estoppel operates in the shadow of a contract and of contract law its scope should be determined by principles and policies of contract law and not the maxims that describe estoppel’s limited remedial techniques. Principal among the relevant principles of contract law is that people have a right to change their mind about a course of action or a decision unless they expressly commit themselves to the course or to the decision. This principle explains why an estoppel generally will not lie when a claimant is misled about an actor’s future conduct. As for the exceptions,76 a likely general explanation is that the circumstances make it unreasonable to insist that the claimant secure an express commitment from the actor regarding the assertion of the right, claim or defence that is the subject of the estoppel.

V

CO N C L U S I O N

Birks might ask at this point: if estoppel can be understood only by reference to other bodies of law, ought we to carve it up and disperse it across other bodies of law? The American doctrine of promissory estoppel and the English doctrine of proprietary estoppel do this in different ways. The American doctrine carves out estoppel based on informal expressions of commitment. The English doctrine carves out estoppel affecting property rights. Following the American path, one could break up equitable estoppel further by carving out estoppel as a remedy for unjust enrichment and estoppel as a remedy for negligent or innocent misrepresentation resulting in harm. Following the English path, one could try to break up equitable estoppel into a body of law on estoppel to assert the statute of limitation, a body of law on estoppel to assert conditions and so on. The latter path seems a dead end, for one would end up with a jumble of doctrines. While the former path may seem to have more promise, it would be a radical change in the landscape of the law. There is no reason for such a change. We seem to be able to live with a doctrine that invites judges to protect detrimental reliance on misrepresentation (sometimes very broadly defined) so long as this can be achieved by shield and not sword. There seems to be power in the metaphor, no matter how inscrutable. 76

See text and notes accompanying nn 16–19 above.

17 Recipient Liability under the Torrens System: Some Category Errors RECI PI ENT LI ABI LI TY UNDER THE TORRENS S YS TEM: S OME CATEGORY ERRORS

MICHAEL BRYAN * M I CHAEL BRYAN

I

I NTRODUCTION

I

S TU D IE D R E S TITU TION in the BCL degree at Oxford University in the early 1970s when Peter Birks was formulating and testing many of the ideas that would later be expounded in An Introduction to the Law of Restitution. The seminars were exciting, but also disorientating, since one never knew from week to week whether the views of Goff and Jones,1 the raft to which many of us clung in an ocean of conceptual uncertainty, were going to be splendidly vindicated or roundly condemned. I was a slow learner of unjust enrichment and restitution theory. I usually saw the point of Birks’s ideas about five years after he initially formulated them, by which time Birks’s thinking had moved on to other ways of seeing this fascinating legal world. But on the few occasions in later years when we met he was invariably prepared to sit down with me and patiently explain his thinking. In conversation he also gave me valuable insights into the non-restitutionary areas of trusts law and equity; there was, in fact, very little in private law which did not, in some way or another, engage his interest. This is not a paper on unjust enrichment, even though the principal case it discusses expresses some dogmatic and controversial views on the relationship between equitable doctrine and unjust enrichment theory. The paper also analyses what many will consider a narrowly domestic issue of Australian law. In this respect it might have disappointed Birks, who was ever the opponent of legal nationalism. It does, however, explore an issue which arises in every legal system in which the principles of recovery of land, whether founded on the enforcement of property rights or in the * Professor of Law, The University of Melbourne. I am grateful to Tony Lee, Matthew Harding and participants in a seminar held at the TC Beirne School of Law at The University of Queensland on 4 May 2007, for their perceptive comments. The usual disclaimers apply. 1 R Goff and G Jones, The Law of Restitution (London, Sweet & Maxwell, 1st edn, 1996).

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application of unjust enrichment doctrine, have to be applied within a framework of statutory title registration. The High Court of Australia’s decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd2 ranges widely over a number of equitable doctrinal areas. They include establishing the proper scope of a fiduciary relationship, breach of fiduciary duty, consent as a defence to a claim for breach of fiduciary duty, liability under both so-called ‘limbs’ of Barnes v Addy3 for receiving property in breach of duty and for assisting in the commission of the breach, and the application of the Torrens system of title registration to actions for the specific recovery of land. But the analysis of all these issues, important though it undoubtedly is, is secondary to the firm views expressed as to the inappropriateness of intermediate courts of appeal in developing the law in cases where the arguments on both sides have been presented in terms of established principles and where no argument has been put that those principles should be modified. The purpose of this paper is not to examine the dicta4 on the requirements for imposing liability on accessories to a breach of fiduciary duty. The dicta will not quell academic discussion, but the terms of the debates on the nature of ‘recipient liability’ and ‘assister liability’ are well known. My thesis is rather that the facts of Farah have nothing to do with Barnes v Addy. It was not a case on ‘knowing receipt’ of property in breach of fiduciary duty, as the New South Wales Court of Appeal supposed, or of ‘knowing or dishonest assistance’, a possibility considered and rejected by the High Court. Moreover, Farah is only the latest in a line of recent Australian cases which have misconceived claims to the recovery of specific property as Barnes v Addy cases.5 Where the property in question is governed by ‘general law’, in other words property other than land, the right question to ask is whether the recipient received the property with notice of the prior breach of fiduciary duty. Real property is, of course, different: the principles of title registration transform the inquiry into an analysis of the limits of the principle of indefeasibility and the proper [2007] HCA 22. (1874) LR 9 Ch App 244. Since the High Court found (at [108]) that the appellant Farah had satisfied any fiduciary obligations of disclosure, the subsequent discussion of accessory liability might be considered obiter. But this would be a mistake. The ex cathedra nature of the pronouncements on these issues make clear that even if they do not formally constitute the ratio decidendi of the decision, they are intended to be applied by all courts below the High Court itself. 5 As well as Say-Dee, they include: Koorootang Nominees Pty Ltd v Australian and New Zealand Banking Group Ltd [1998] 3 VR 16 (SCV) (though note the discussion at 113–14, per Hansen J, of whether a preserved equitable interest in the shares can be enforced); Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286 (NSWCA) and Macquarie Bank v Sixty- Fourth Throne Pty Ltd [1998] 3 VR 133 (VSC). The judgments in LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517, 548–9 and 554 (WASC), consider both the ‘knowing receipt’ liability and ‘notice’ heads of liability discussed in this paper. 2 3 4

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scope of its exceptions. Recipients of property through fiduciary wrongdoing will often succeed in disposing of the proceeds so that there is no property to be reclaimed. The first limb of Barnes v Addy provides a solution to these cases by enabling the beneficiary to recover the value of the property received. This is restitutionary in the sense of restoring the value of the benefit obtained by the recipient to the party who is entitled to that benefit and who has been deprived of it (the trustees, in the case of a trust, and otherwise the party to whom the fiduciary duty is owed). But where property, being the subject matter of the fiduciary relationship, can be identified in the hands of the recipient,6 the claim for its return in specie will be governed by the principles of equitable title. Put simply, the paper argues: let property rights be enforced as property rights—and do not dress up their enforcement of property rights in the clothing of equitable doctrines which serve other purposes. The paper is divided into three parts. The first establishes that the claim to the return of specific property to a trust fund or to a fiduciary who must apply it towards the fulfilment of the purposes of the fiduciary relationship, such as a joint venture, is a claim to enforce a pre-existing equitable interest in property. Its resolution will depend on whether or not the recipient is a good faith purchaser of the property for value without notice of the breach of duty. The second part demonstrates why the dispute in Farah relates to the enforcement of a subsisting equitable interest in property subject to the application of the doctrine of notice. The final part examines how the principles of title registration apply to the facts of Farah. It shows how, even if the disputed land had been transferred in breach of fiduciary duty, it would not have been recoverable. On this point, the ‘title-based’ reasoning of this paper is in accord with the Barnes v Addy reasoning of the High Court. But the barring of a proprietary claim to recover property should not prevent, in an appropriate case, a successful personal claim under the first limb of Barnes v Addy, based on the value of the property received.

II

T H E PR E S E RVAT I O N O F E QUI TA B L E R I G H T S F O L L OW I N G A B REACH O F T RUST OR OT HER F IDUCIARY DUTY 7

The starting point for analysis is the core case of proprietary recovery from a transferee to whom a fiduciary, acting in breach of obligation, has 6 This is clearly the case where the claim is made to the original property misappropriated. Whether the return of a traceable substitute for the original property enforces a pre-existing property right is contentious. See text below at n 25. 7 This section is substantially based on M Bryan, ‘The Liability of the Recipient: Restitution at Common Law or Wrongdoing in Equity?’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Thomson, 2005) 327, 330–3.

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conveyed property. Suppose that T, holding property on trust for B, in breach of trust conveys the legal title to R, the recipient, who is not a good faith purchaser for value without notice of the breach of trust. How is a claim brought by B (or perhaps by T2 who has been appointed by the court to replace the original delinquent trustee) for recovery of the property to be analysed? Three explanations of R’s obligation to restore the property can be found in the cases.8

A

The Persistence of the Express Trust

The first explanation is that R holds the property on express trust for B, and as express trustee is bound by the equitable obligations which T assumed. The obligations are said, on this analysis, to persist through the later assumption of the legal title by R unless defeated by the successful assertion of the defence of good faith purchase without notice, or by some other bar to recovery, such as the claimant’s delay in bringing the claim. This is, at first sight, an unpromising explanation of R’s liability to restore the trust property.9 The settlor never expressed any intention to vest property in R as trustee, and R may well be deficient in the qualities required of a trustee of an express trust. It would be implausible, for example, to expect R to perform a trustee’s duty to invest trust monies. Why, then, clothe R in the sober suit of an express trustee? The answer is that equity does not classify the recipient as an express trustee in the sense of assuming the office of trusteeship, inclusive of all its duties, rights and powers. The fundamental duty is that of restoring the trust property to the trust. Richard Nolan has recently argued that the beneficiary’s fundamental proprietary right under a trust is the negative one of excluding non-beneficiaries from the enjoyment of trust assets.10 This includes the power to exclude a recipient of the assets from using them for personal benefit. The correlative liability that this imposes on the recipient is that of restoring the property to the trust. Some writers have expressed the view that the obligations imposed by the express trust continue to be enforceable against later recipients. For example, Maitland explained the recipient’s liability to make restitution of trust property in terms of the persistence of the original trust obligations unless and until destroyed by the application of the good faith purchase defence.11 However, the proposition should be understood in the narrow 8 L Smith, ‘Transfers’ in P Birks and A Pretto (eds), Breach of Trust (Oxford, Hart Publishing, 2002) 111. 9 Support can nonetheless be found for it in R Meagher and W Gummow, Jacobs’s Law of Trusts in Australia (Sydney, Butterworths, 6th edn, 1997) para 1304, stating that ‘[w]hile the third party is often called a constructive trustee, he is more properly treated as one against whom the beneficial interest under the primary trust persists because he cannot set up a title as bona fide purchaser of the legal title without notice.’

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sense proposed by Nolan. It means no more than that the beneficiary has a power, enforceable by proprietary remedy, to prevent an unauthorised use of the trust property. The power imposes a corresponding liability on the recipient to restore the trust property. The statement does not mean that the recipient assumes all the obligations of trusteeship. It was unnecessary in early equity to clarify the nature of the express trusteeship imposed on the recipient. The cases usually involved passive uses, which resembled the modern bare trust in imposing few obligations on the feoffee or trustee beyond the duty to preserve the trust estate and to convey it at the direction of the settlor. For practical purposes, it did not matter whether the recipient was characterised as an express or constructive trustee, and, if an express trustee, what duties trusteeship entailed.12 The distinction arguably only became critical with the recognition of models of active trusteeship associated with the emergence of new types of wealth-holding trusts in the eighteenth century.13 Applying Nolan’s thesis, statements such as those made by Maitland—who made them in that forum which positively invites oversimplification, namely student lectures—should be construed as a summary way of stating that the recipient must restore the trust property to the trustees, or to replacement trustees, so that the latter, and not the recipient, can perform the trust according to its terms. In contrast to this analysis, some American authorities would impose more onerous obligations on recipients—at any rate on recipients who take property with actual, as opposed to constructive, knowledge of the breach of trust. According to these authorities, the recipient is obliged to perform all the obligations of an express trustee. On this view, a recipient who knowingly receives the proceeds of a breach of trust is liable for failing to invest trust moneys, or for failing to invest prudently, on the same basis as an express trustee.14 However, these authorities do not contradict the analysis in the last paragraph; they merely qualify it in a sensible respect. Many of the cases cited for imposing this more burdensome form of trusteeship are instances of trusteeship de son tort. This is a head of equitable liability imposed on the basis of a third party’s R Nolan, ‘Equitable Property’ (2006) 122 LQR 232. F Maitland, Equity: A Course of Lectures, revised by J Brunyate (Cambridge, Cambridge University Press, 1936) 82. 12 See, eg Anonymous YB 11 Edw IV, fol 8, pl 1.13 (1471), which contains possibly the earliest statement on recipient liability: ‘If my trustee conveys the land to a third person who well knows that the trustee holds for my use, I shall have a remedy in the Chancery against both of them; as well against the buyer as against the trustee; for in conscience he buys my land.’ 13 G Moffat, Trusts Law: Text & Materials (Cambridge, Cambridge University Press, 4th edn, 2005) 42–5. 14 W Fratcher, Scott on Trusts (Boston, MA, Little Brown, 3rd edn, 1967) vol 4, § 291.2. See also S Worthington, Equity (Oxford, Clarendon, 2nd edn, 2006) 189, suggesting that complex trust obligations can be imposed on recipients with actual knowledge of the trust. 10 11

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intentional exercise of control over trust property.15 It is artificial to treat a recipient as if he were in all respects an express trustee, but if, actually knowing that he has received trust property, the recipient fails to return it to the trust, he cannot be heard to complain if he is made chargeable for the profit that would have accrued to the beneficiaries if timely restitution of the property had been made.16 To do so is not to characterise the recipient as an express trustee; it is simply to hold him liable to the trust for gains made and losses incurred by reason of his role in obstructing the proper performance of the trust.

B The Imposition of a Constructive Trust The second explanation of R’s liability to restore the property to the trust is to say that he is a constructive trustee of the property. This was until recently the dominant analysis, perhaps justified by the reluctance of courts to characterise recipients as express trustees.17 According to this explanation, the constructive trust is a proprietary remedy imposed over the property R has received. The trust is remedial in the sense that the only obligations imposed on the recipient are to reconvey the property to T (or to the replacement T) and to preserve the property pending reconveyance.18 This model of constructive trust must not be confused with constructive trusteeship under the first limb of Barnes v Addy: the recipient’s liability does not here depend on the beneficiary showing that the recipient had knowledge of the prior breach of trust. On the contrary, the onus rests on the recipient to prove that she is a good faith purchaser for value without notice of the breach. But, if not a Barnes v Addy animal, what species is this constructive trust? Maitland, writing of purchasers of trust property taking with notice of the breach, located the purchaser’s liability within considerations of conscience: As regards purchasers all is to depend on conscience. If you buy with notice, then in conscience it is my land.19

Scott, on the other hand, suggested that the liability of the purchaser rested on a different basis from that of the donee of the trust property, at least Re Barney [1892] 2 Ch 265 (HC); Mara v Browne [1896] 1 Ch 199 (CA). Cf the treatment of some constructive trustees as express trustees for the purposes of early limitations legislation: J Brunyate, Limitation of Action in Equity (London, Stevens & Sons Ltd, 1932) 50–9. 17 See R Meagher and W Gummow, n 8 above, 11; J McGhee, Snell’s Equity (London, Sweet & Maxwell, 30th edn, 2000) 9–41; J Martin, Hanbury & Martin: Modern Equity (London, Sweet & Maxwell, 15th edn, 1997) 298. 18 Muschinski v Dodds (1985) 160 CLR 583 (HCA). See also Nolan v Collie [2003] VSCA 39 (rejecting the argument, on the facts, that the constructive trustee was entitled to exercise the right to indemnity available to express trustees). 19 Maitland, n 11 above, 32. 15 16

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where the latter had no notice of the breach of trust. Agreeing with Maitland that a purchaser of property who had notice of the breach was bound in conscience to return the property to the trust, Scott rejected ‘conscience reasoning’ to justify the imposition of a constructive trust over property received by a donee with no notice of the breach. It was not ‘against conscience’ for the donee to retain the property, unless ‘conscience’ was invoked as an ex post rationalisation of the decision to compel restitution. The donee’s liability was instead justified in terms of the prophylactic prevention of unjust enrichment: The real reason why a donee of trust property takes subject to the trust is that otherwise he would be unjustly enriched. It would be unjust that he should profit by a wrong done by the trustee to the beneficiaries.20

C

The Authorities

Taking stock at this point, and before turning to the third explanation of R’s proprietary liability, we should note that both models of proprietary liability described above are supported by high authority. A well-known example is the early decision of the High Court of Australia in Black v S Freedman & Co.21 Black stole money from his employer and paid some of it into his wife’s bank account. The High Court held that the wife, being a volunteer, held the money on constructive trust for her husband’s employer. O’Connor J’s oft-cited and controversial22 dictum that ‘[w]here money has been stolen, it is trust money in the hands of the thief’ aphoristically expresses the principle on which a constructive trust was imposed over the wife’s bank account. Two related features of the case deserve emphasis. First, the employment relationship between the plaintiff and Black was fiduciary, although the High Court attached no special weight to that fact. Secondly, no attempt was made to argue in Barnes v Addy terms that the wife had ‘knowingly received’ the money in breach of fiduciary duty. It sufficed for the imposition of the constructive trust that she was a volunteer and, therefore, could not show that she was a good faith purchaser. 20 Fratcher, n 14 above, vol 4 at § 284. The second sentence either betrays confusion between restitution for unjust enrichment and restitution for wrongs, or deliberately shows a lack of concern for the significance for the distinction. For Birks the distinction was of course crucial: see P Birks, ‘Misnomer’ in W Cornish et al (eds), Restitution: Past, Present and Future (Oxford, Hart Publishing, 1998) 1. 21 (1910)12 CLR 105 (HCA). 22 Controversial because any trust—express, resulting or constructive—is superfluous where restitution of stolen money is concerned, unless it has been mixed with the thief’s own money. The victim of the theft can rely on her legal title which did not pass to the thief: Ilich v R (1987) 162 CLR 110,138–9 (HCA). For a defence of Black v S Freedman & Co, see J Tarrant, ‘Property Rights to Stolen Money’ (2005) 32 University of Western Australia Law Review 234.

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An example of the express trust analysis is the decision of the House of Lords in Foskett v McKeown.23 Investors had contributed to a trust fund to finance a property development. One of the trustees misappropriated money from the fund to pay some of the premiums towards a life assurance policy taken out for the benefit of his children. When exposure of his wrongdoing became imminent the trustee committed suicide, thereby entitling the children to a payment of just over £1 million under the policy. A majority of the House of Lords held that the investors were entitled to a proportionate share of the payment to the children representing the amount of trust money applied in paying the premiums.24 The decision answers, for the purposes of English law, some fundamental and contested questions on the juridical basis of tracing.25 However, its relevance for the present paper lies not in what it says about tracing but in how the tracing issues were presented. The children were not liable because they had ‘knowingly received’ the insurance payment purchased in part with misappropriated trust money. On the contrary, they were liable on the straightforward ground that, being volunteers, they could not show that they were good faith purchasers of the insurance pay-out. In contrast to Black v S Freedman & Co, the investors’ proportionate share of the payment was held to belong to the original express trust created for their benefit. This did not mean that the children became express trustees; all it meant was that the investors’ proprietary rights as beneficiaries to exclude others from the enjoyment of the trust property extended to the children who came under a duty to restore to the trust a proportion of the money they had received, including some of the profit accruing from investment of that money. Where B’s money has been mixed by T with his own money before payment to R, the tracing rules complicate the analysis but do not alter its fundamental character. The House of Lords held in Foskett that, in tracing their money into the insurance pay-out, the investors were vindicating their title to their own money. The counter-argument that the investors had acquired a new right to that share by virtue of the law of unjust enrichment was rejected. Their Lordships’ conclusion on this point remains controversial.26 Arguments about the nature of tracing are in substance disagreements about how far the metaphor of the ‘persistence’ of an equitable interest can be pressed when that interest becomes merged with other interests. However, where the original property is [2001] 1 AC 102 (HL). Lords Steyn and Hope dissented on the ground that the appropriate remedy was an equitable lien to secure repayment of the amount misapplied. 25 R Grantham and C Rickett, ‘Tracing and Property Rights: The Categorical Truth’ (2000) 63 MLR 905; G Virgo, The Principles of the Law of Restitution (Oxford, Oxford University Press, 2nd edn, 2006) ch 20. Cf P Birks, Unjust Enrichment (Oxford, Oxford University Press, 2nd edn, 2005) 36. 26 See the material referred to at n 25 above. 23 24

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neither mixed nor exchanged for other property, so that no tracing issues arise, the recovery of that property is indisputably a matter for the application of the principles of equitable property and not the law of unjust enrichment.

D

Recovery in specie under Barnes v Addy

This brings us to the third explanation of B’s recovery from R. This is that B (or replacement T) is entitled to recover the property from R provided that B satisfies the requirements of recipient liability under the first limb of Barnes v Addy. The relevance of Farah to the present argument is that it follows a consistent line of recent Australian authority in assuming that a successful Barnes v Addy claim for ‘knowing receipt’ entitles the claimant, upon proof of the inadequacy of a personal remedy, to the award of a proprietary remedy.27 It is unnecessary to examine all the cases which have applied this approach.28 An example of the recent trend of ‘Selbornising’ the recovery of property from recipients is the decision of the New South Wales Court of Appeal in Robins v Incentive Dynamics Pty Ltd (in liq).29 The respondent company was formed for the purpose of marketing incentive schemes for employees of large companies. The directors formed another company, Coldwick, and authorised payment of the respondent’s money to Coldwick to enable that company to buy properties in South Melbourne and Crows Nest. The acquisitions conferred no benefit on the respondent, and the directors were held to have acted in breach of section 232(6) of the Corporations Law in making them.30 The New South Wales Court of Appeal held that the respondent’s liquidator was entitled to the benefit of a constructive trust over the properties acquired by Coldwick with the respondent’s money. The basis for the imposition of the trust was that the directors of Coldwick had received the purchase money for the properties with knowledge of the breaches of statutory duty committed by the directors of the respondent company and were therefore accountable on the basis of having ‘knowingly received’ property in breach of fiduciary duty. The constructive trust was described as a remedial constructive trust under the first limb of Barnes v Addy.31 See Farah, n 2 above, [200]. See the authorities listed at n 5 above. (2003)175 FLR 286 (NSWCA). The provision forbids officers of a company from making improper use of their position to gain, directly or indirectly, an advantage for themselves or others or to cause detriment to others. It has since been replaced by s 182 of the Corporations Act 2001 (Cth). 31 (2003) 175 FLR 286, 297 (per Mason P, citing Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566, 585 (HCA)) (NSWCA). 27 28 29 30

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Coldwick would have been held liable on any theory of recipient liability—whether based on knowledge, notice or unjust enrichment— because the directors of the two companies were substantially identical. But the significance of Robins for present purposes is that it illustrates the tendency of the recent Australian cases to prefer a ‘knowledge-based’ approach founded on determining whether R knew of T’s breach of trust, rather than the ‘notice-based’ approach favoured by Maitland and Scott on Trusts and supported by the older authorities. The Robins approach is less friendly to plaintiffs, who must show that R knew of T’s breach of trust, than the property approach, which places the onus on R to show that he is not a good faith purchaser for value without notice. It is unclear why the framework of analysis in some recent cases has shifted from the enforcement of pre-existing equitable title to liability based on Barnes v Addy. The shift has not been justified, or even very much noticed, by the judges who have made it. Some possible justifications will be considered in the next section of the paper. Generally speaking, it is surprising that Australian equity has embraced Barnes v Addy so enthusiastically as a basis for proprietary restitution. The doctrine of notice, which is the primary though not the only32 determinant of recovery of equitable property, was developed over 500 years ago in order to identify the circumstances in which beneficial interests under a trust will be destroyed by the trustee’s unauthorised conveyance of the trust property to a third party. It only assumed its final form after several centuries of Chancery litigation involving various categories of recipients of trust property—heirs and creditors, as well as purchasers with notice of the breach and donees. The different versions of the doctrine of notice applied throughout the formative period of the doctrine reflected evolving ideas on where the compromise between beneficiary protection and the transferee’s power to deal with property as his own should be struck.33 If ‘notice’ is to be superseded by ‘knowledge’ in this area, or for that matter by strict liability for unjust enrichment,34 lawyers should be told why the terms of the compromise need to be altered. Replacing the doctrine of notice by ‘knowing receipt’ liability shifts the balance in favour of recipients because the onus of proving knowledge rests on the beneficiary. This is also the effect, though for different reasons, of replacing notice liability by recovery based on unjust enrichment. The latter favours recipients who, if they cannot bring themselves within the safe harbour of 32 Equitable bars to recovery, such as laches, hardship and the ‘clean hands’ doctrine, may also defeat recovery. 33 Maitland, n 11 above, 112–13: A Simpson, A History of the Land Law (Oxford, Clarendon Press, 2nd edn, 1986) 180; Smith, n 8 above, 119–20. 34 Good faith purchase is a defence to a claim in unjust enrichment, but the addition of the defence of change of position, available to donees and purchasers who do not give full value for the trust property received, confers greater protection on recipients on the unjust enrichment version of liability than on the version based on equitable title.

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the good faith purchase defence, may at least be able to establish a complete or partial defence of change of position.35 Either of these alternative ‘equitable moves’ can be justified, but so far neither, judicially at least, has been.

III

J U S T I F I CAT I O N S

Two justifications for replacing the doctrine of equitable title by proprietary liability based on the Barnes v Addy jurisprudence can be suggested. The first is specific to the recovery of land. Matthew Harding takes as his starting point the truism that Torrens legislation has abolished the doctrine of notice with respect to registered interests in land.36 The registered proprietor of an interest in Torrens land takes free of any prior interest affecting the land, including an interest under a trust, even if she has notice of it. An express trust of Torrens land cannot, therefore, be enforced against a subsequent registered proprietor on the basis of the proprietor’s notice of the trust. It is possible, however, to make a proprietary claim to the land under the first limb of Barnes v Addy because such a claim arises subsequent to registration. The constructive trust is remedial in nature. Being satisfied that the recipient is liable as an accessory to the breach of fiduciary duty and that a personal remedy is insufficient to achieve substantial justice, the court makes a declaration that the property is held on constructive trust for the claimant.37 This analysis convincingly explains why claims to the recovery of trust land are determined within a Barnes v Addy framework. Being claims to enforce pre-existing trust property, they would be defeated by the principle of indefeasibility of title. As Harding states, ‘[t]his is the most important sense in which it may be said that [the recipient’s] title is indefeasible’.38 The analysis also explains why the constructive trust imposed in Robins v Incentive Dynamics was characterised as a remedial constructive trust. It is, however, on its own valuation, a limited explanation. It explains why claims to specific restitution of land can only succeed if they are accommodated within a discretionary Barnes v Addy framework. Different reasons are needed to explain why claims to the recovery in specie of other types of 35 The defence will defeat a claim to specific recovery in specie, where the recipient still has the property but has in good faith disposed of other property in reliance on the validity of the receipt. 36 Real Property Act 1886 (SA), ss 72, 186 and 187; Transfer of Land Act 1893 (WA), s 134; Real Property Act 1900 (NSW), s 43; Transfer of Land Act 1958 (Vic), s 43; Land Titles Act 1980 (Tas), s 41; Land Title Act 1994 (Qld), s 184(2)(a); Land Title Act 2000 (NT), s 188(2)(a). 37 M Harding, ‘Barnes v Addy Claims and Indefeasibility of Torrens Title’ (2007) 31 Melbourne University Law Review 343. 38 Ibid.

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trust property, such as chattels and shares, are decided as ‘knowing receipt’ cases, and not by application of the doctrine of notice. A second possible justification for bringing proprietary claims within the scope of the ‘knowing receipt’ doctrine is that failure to do so would perpetuate an inconsistency between the personal and proprietary liabilities of the recipient. On the orthodox account of recipient liability, set out above, a recipient is strictly liable to return the property, or its traceable proceeds, unless he is a good faith purchaser or can establish some other bar to recovery. On the other hand, the personal liability of the recipient to repay the value of the property received requires the beneficiary to prove that the recipient had some knowledge of the breach of trust. The former places the burden on the recipient to show absence of notice of the breach; the latter places the onus on the beneficiary to show that the recipient knew of the breach. Rationality of legal principle would be promoted, so it is argued, by applying the same ‘knowledge’ test to both personal and proprietary restitution. Arguments to remove structural incoherence in the law always deserve close consideration, the more so if, as in this case, the force of the argument applies to all forms of property, and not just to land. But in this case there is no reason to assume that the principles governing the return of property in specie should be identical to the principles governing the personal liability of the recipient where the property can no longer be returned. In the former case, a claimant who proves that she has title to property which was misappropriated and that the property is now in the possession of the defendant has compelling reasons for requiring the return of her property.39 If the claimant’s title is equitable, the claim will be defeated only by the defendant’s successful assertion of the defence of good faith purchase or by showing some other equitable bar to recovery. For civilian lawyers this is a relatively simple matter of vindicating title to property, but common lawyers must mediate vindication through the established common law and equitable actions for the recovery of property.40 Where the defendant no longer has title to the property, perhaps because it has been consumed or sold to a good faith purchaser for value 39 The logic of a proprietary claim in unjust enrichment, disapproved by the High Court in Farah, is similar to an equitable proprietary claim. Both rely on the moral force of the assertion, ‘You have my property; give it back!’ The differences are that (i) the equitable proprietary claim is based on the claimant’s pre-existing title to property, whereas the claim in unjust enrichment is based on a title which has passed to the defendant and which should, for a legally approved reason, be restored to the claimant; and (ii) the defence of change of position is available to a claim in unjust enrichment but not to an equitable proprietary claim. The second difference is a consequence of the first in that it protects the recipient’s interest in dealing as absolute owner with property to which he has title. 40 In the case of chattels the return of the chattel will only be possible if the requirement for specific restitution in a claim for detinue is met.

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without notice of the claimant’s interest, no question of vindication arises. The claimant’s personal claim to restitution of the value of the property received by the defendant will be balanced against the latter’s honest belief that he was entitled to deal with that property as his own. Where the return of specific property is not in issue, the defendant’s interest in security of receipt is valued more highly. Argument rages, of course, as to whether the balancing of interests is better effected by an inquiry into the state of the defendant’s knowledge or by an application of the law of unjust enrichment. However, that disagreement must not be allowed to deflect attention away from the proposition that property wrongfully received must be returned to the title-holder unless the recipient can establish a valid common law, equitable or statutory defence. The obligation to restore property in specie is strict, whatever may be the case where a personal claim is brought against a recipient of that property.

IV

This paper has so far considered the principles governing the recovery of trust property, the legal title to which has been conveyed by the trustee to a recipient. Farah did not involve a claim to recover trust property, but it will nonetheless be suggested that the claim should be analysed as being in substance one of specific recovery. The facts of Farah, as ultimately found by the High Court, were as follows. Say-Dee and Farah entered into an agreement to develop a property. The property was purchased by the parties as tenants in common. Say-Dee provided part of the purchase price, the balance being paid from a bank loan secured by a mortgage over the property. Farah was controlled by Elias, a real estate developer. The agreement created a joint venture agreement which was conceded to be fiduciary in character. Farah’s development application lodged with the council was refused on the ground that the site was too narrow for the proposed development. Council officers informed Elias that the development potential of the property could only be realised if it were to be amalgamated with other sites. The information was later included in the council’s official Notice of Determination, which Elias forwarded to Say-Dee. Elias then arranged for two adjoining properties41 to be purchased. The title to one of the properties was taken in the name of a company controlled by Elias. Units in the other property were purchased by Elias, his wife and their daughters, all of whom contributed to the purchase price. Say-Dee claimed that Farah had acted in breach of fiduciary obligation in not passing on to 41 A third property, not adjoining the original property, was also purchased but was conceded not to be within the scope of the joint venture.

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Say-Dee the information that the original property could be redeveloped if adjoining properties were purchased, and in not giving Say-Dee an opportunity to invest in the adjoining properties as part of the joint venture. In addition, Say-Dee argued that Mrs Elias and the daughters were liable in equity to return to Say-Dee its share of the properties they had received on the basis that they had received property in breach of fiduciary duty under the first limb in Barnes v Addy. The New South Wales Court of Appeal, reversing some of the findings of fact made by the trial judge, as well as disagreeing with some of the inferences drawn from those findings, held that Farah had acted in breach of fiduciary duty in not notifying Say-Dee of the advice it had received from the council to amalgamate the original property with adjoining properties. The Court went on to hold that Mrs Elias and her daughters were liable to Say-Dee for having received property in breach of fiduciary duty, either because Elias’s knowledge in purchasing the properties in breach of fiduciary duty was to be imputed to them as principals or because they were strictly liable in unjust enrichment to return to Say-Dee the share of the proceeds of sale of the properties to which Say-Dee was entitled under the terms of the joint venture agreement. The Court of Appeal imposed a constructive trust over the properties and appointed a receiver to sell the properties and divide the proceeds between the Say-Dee and Farah interests. On Farah’s appeal to the High Court, it was held that Farah was under a fiduciary duty to disclose to Say-Dee the council’s advice that amalgamation of the original property with adjoining properties was necessary in order to maximise the development potential of the former, and that the adjoining properties were available for purchase. However, the High Court concluded that Farah had made sufficient disclosure to Say-Dee of the advice it had received from the council. Moreover, Say-Dee could itself assess, on the basis of its own business experience, the development opportunities of which advantage could be taken on the basis the council’s advice. Say-Dee was held to have consented to the purchase by the Farah family interests of the adjoining properties. The conclusion that Farah had not committed a breach of fiduciary duty meant that it was not, strictly speaking, necessary for the High Court to consider the accessory liability of Mrs Elias and the daughters. In view of the significance attached by the Court of Appeal to the issue, however, the High Court proceeded to review these aspects of the decision. It held that Mrs Elias and the daughters were not liable under the first limb of Barnes v Addy for having ‘knowingly received’ the units in one of the properties in breach of fiduciary duty. They had not received trust property. Even if the information Elias had received had been confidential, which was doubted, it would not constitute property for the purposes of imposing equitable liability for receipt under Barnes v Addy. Moreover,

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Mrs Elias and the daughters could not be held liable on the basis that the knowledge of Elias, as agent, could be imputed to those family members on whose behalf he had been acting. There was no evidence that Elias had purchased the properties as the agent for those other members of his family; the latter bought their interests in the properties for themselves. The High Court went on to reject the imposition of recipient liability on the basis of unjust enrichment because, in addition to the fact that it had been neither pleaded nor argued, that basis of liability did not represent the law in Australia.42 Pursuing other potential paths to liability, the High Court also held that Mrs Elias and the daughters were not liable for having assisted in the commission of a breach of fiduciary duty because they had not participated ‘in a significant way’ in any breach of fiduciary duty committed by Elias, and because they had no ‘actual knowledge of the essential facts which constituted the breach’.43 The final potential ground of liability considered was a tracing claim. An argument that Say-Dee was entitled to trace the profits made by Elias from a breach of fiduciary duty into the units purchased by Mrs Elias and the daughters foundered on the evidence that they were purchasers for value without notice of the breach, and thus not volunteers.44

V

AN ALYS I S O F

There is clearly a great deal of meat in Farah on all aspects of fiduciary law which will have to be marked, learned and inwardly digested by equity lawyers. All this is in addition to pronouncements on the proper role of intermediate courts of appeal, and of the High Court itself, in applying and developing the common law of Australia. But the focus of this paper is on a relatively narrow part of the decision. The High Court found that Farah had not acted in breach of fiduciary obligation. Let us assume, as the High Court did in its analysis of the potential liability of Mrs Elias and her 42 Dicta in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373, 396 and 410, were held to constitute the authoritative exposition of the principles of recipient liability. These dicta were said at [134] to impose a ‘notice’ test, but the High Court did not clarify what ‘notice’ or ‘knowledge’ (see [122]) means for the purpose of imposing liability under the first limb of Barnes v Addy. Contrast [177], where a full explanation of ‘knowledge’, in terms of the well-known Baden Delvaux taxonomy of knowledge, is provided for the purposes of the second limb of Barnes v Addy. 43 Farah, n 2 above, [180]. The High Court reserved to itself for a later occasion any consideration of whether a test of liability based upon the dishonesty of the assister should be introduced into Australian law, as the Privy Council and House of Lords have done in a line of decisions beginning with Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378. See Farah, [164]. Nonetheless, the High Court departed from one aspect of the Tan decision, in requiring ‘any breach of trust or breach of fiduciary duty relied upon [to] be dishonest and fraudulent’: see Farah, [179]. Cf Tan, 384–5. 44 Farah, ibid, [188].

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daughters, that Farah had committed the breaches of fiduciary duty alleged by Say-Dee. Would Say-Dee’s recovery of the properties purchased in breach of obligation depend, by application of the first limb of Barnes v Addy, on whether the family members had ‘knowingly received’ the properties in breach of fiduciary obligation? It is suggested that it would not. Liability under the first limb of Barnes v Addy is personal. To apply this head of liability to the recovery of property risks confusion with the application of the doctrine of notice, as that doctrine applies to equitable title. This can be demonstrated by an examination of the following hypothetical examples. The first is a model case of a breach of fiduciary duty. Suppose that Elias, acting in breach of his duty to offer Say-Dee an opportunity to buy properties where the purchase would have properly come within the scope of the joint venture, had bought the properties from a third party and taken title to them in his own name, or in the name of companies he controlled. In this example, as the High Court noted, there is no objection to requiring Elias to hold the properties on constructive trust for Say-Dee.45 It is irrelevant that Say-Dee never had legal title to the properties. In equity they belong to Say-Dee.46 It is, admittedly, not an easy question to identify the basis of the principal’s equitable title in such a case. Nonetheless, it is suggested that this is a legitimate application of the otherwise controversial maxim that ‘equity considers as done that which ought to be done’.47 The second hypothetical is to suppose that Elias had purchased the properties in the circumstances specified in the first hypothetical above, but had then placed title to the properties in the name of Mrs Elias and the daughters. The diversion of the title to the third parties should not be treated as a material difference. The principles governing the situation of a fiduciary who, acting in breach of duty, takes title to property in the name of members of his family should be identical to the principles applicable to a fiduciary who takes title in his own name. The family members in this hypothetical are volunteers.48 As in the first hypothetical, Say-Dee, as principal, has equitable title to the properties which is enforceable against the recipients, not by an invocation of Barnes v Addy, but because Mrs Elias and the daughters, on whom the burden of proof lies, cannot Ibid, [110]. Cook v Deeks [1916] 1 AC 554 (PC). See the discussion in R Meagher, D Heydon and M Leeming, Meagher Gummow & Lehane’s Equity Doctrines & Remedies (4th edn, Sydney, LexisNexis, 2002) para 5–140. 47 The application of the maxim to justify the imposition of a constructive trust over properties acquired with the proceeds of a bribe in A-G for Hong Kong v Reid [1994] 1 AC 324 (PC) elicited the predictable and justified disapproval of P Birks in ‘Property in the Profits of Wrongdoing’ (1994) 24 University of Western Australia Law Review 8. 48 This is, of course, in contrast to the family members in Farah, who were good faith purchasers: Farah, n 2 above, [72] and [188]. 45 46

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establish the defence of good faith purchase. If it is accepted that a principal has equitable title to the properties in the first hypothetical, when the fiduciary has taken the legal title in his own name, then it must also be accepted that the principal has equitable title which can be enforced against the family members in the second hypothetical. Our final hypothetical brings us closer to the actual facts of Farah, assuming that a breach of fiduciary duty had actually been committed in that case. Suppose that Elias committed a breach of fiduciary duty in not bringing the opportunity to purchase the properties to the attention of Say-Dee. Suppose further, however, that the purchasers of the properties were not Elias himself, but his wife and daughters.49 Could Say-Dee recover the properties from the latter? On these facts the family members, as in Farah, might be able to show that they are good faith purchasers for value without notice of the breach. However, even in the absence of good faith, Say-Dee’s claim to enforce its equitable title to the properties will depend on secure proof of Elias’s initial breach of fiduciary obligation. This will depend on the nature of the fiduciary’s obligation of disclosure. Fiduciaries are not subject to any ‘general’ duty to disclose material facts to the principal: the duty is only to disclose facts giving rise to a conflict between the fiduciary’s personal interest and the duty owed to the principal.50 The court in this example must be satisfied that Elias had an interest in the purchase of the properties even though he was not the purchaser. This could be, for example, if he intended to assist the purchasers in redeveloping the properties. However, if the breach of fiduciary duty has been established, the principal can recover the properties unless the purchasers of the properties can affirmatively demonstrate their good faith. Once again, Barnes v Addy is irrelevant.

VI

THE APPLICAT ION O F TORRENS PRINCIPLES TO

Even if the arguments in the previous section of the paper are accepted, they can still be fairly criticised on the ground that they resemble a production of Hamlet without the Prince of Denmark, for they take no account of the fact that title to the properties in dispute in Farah had been registered under the Torrens system of title registration. Mrs Elias and her daughters had obtained indefeasible title to them upon registration. It is a cornerstone of the Torrens system of title by registration that the doctrine of notice does not apply to registered proprietors, who are therefore not Ibid, [188]. Parker v McKenna (1874) LR 10 Ch App 96 (CA); DPC Estates Pty Ltd v Grey and Consul Development Pty Ltd [1974] 1 NSWLR 443 (NSWCA). For a discussion of the sources of the fiduciary’s interest for the purposes of a determining the existence of a conflict of interest, see M Conaglen, ‘The Nature and Function of Fiduciary Loyalty’ (2005) 114 LQR 452. 49 50

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bound by trusts affecting the land at the time of registration.51 Say-Dee’s equitable interest under the constructive trust arising from Elias’s (assumed) breach of fiduciary obligation was therefore defeated by the recipients’ registered title unless an exception to indefeasibility applied. As Harding has pointed out, ‘knowing receipt’ analysis has been applied to these title-based claims precisely because it offers plaintiffs the most promising pathway to circumvent the obstacle of indefeasibility.52 It is therefore necessary to consider this aspect of Say-Dee’s claim. It is suggested that, even if the dispute in Farah is conceptualised as being one of the enforcement of a pre-existing equitable title to the disputed properties, no exception to indefeasibility would have enabled Say-Dee’s claim to succeed. On this issue, the analysis of the High Court is correct. It is suggested, however, that, as an alternative to a claim against Farah for equitable compensation in respect of the value of the properties lost by reason of the (assumed) commission of the breach of fiduciary duty, Say-Dee should have been entitled to a personal claim against Mrs Elias and her daughters, again assessed as the value of the properties received, under the first limb of Barnes v Addy. The New South Wales Court of Appeal held that Say-Dee’s ‘personal equity’ to recover the disputed properties, based on their successful claim based on the first limb of Barnes v Addy, defeated the indefeasible title to the properties obtained by the wife and daughters upon registration. There is a great deal of confusion about the meaning of ‘personal equities’ in this context. Indeed, the term itself is confusing since it refers to the successful assertion of a proprietary ground of recovery of land which can be based on legal or statutory, as well as equitable, rights. It has nothing to do with personal remedies in equity. Analysis of the ‘personal equities’ exception to indefeasibility routinely begins with the citation of the passage in Lord Wilberforce’s Privy Council opinion in Frazer v Walker, where his Lordship states that the indefeasibility principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam founded in law or in equity, for such relief as a court acting in personam may grant.53

The dictum has not been understood to mean that all legal and equitable claims affecting property are enforceable against an indefeasible title. The interests protected by the in personam exception fall into two classes. The first consists of legal or equitable interests created by the registered proprietor with the intention that they should be enforceable against the registered title. For example, a proprietor who declares himself trustee of 51 52 53

See n 36 above for the statutory provisions. Harding, n 37 above. [1967] 1 AC 569, 585 (PC).

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his land will burden his title with the equitable interest he has created, and the beneficiary will be entitled to enforce her rights against the proprietor, including the right to call for a transfer of the land to her if she is absolutely entitled to the land under the trust. Say-Dee obviously did not obtain an interest of this kind. The second consists of equitable interests imposed by court order in response to conduct on the part of the registered proprietor with respect to the land which is held to entitle the plaintiff to proprietary relief.54 As Wilson and Toohey JJ stated in Bahr v Nicolay (No 2), indefeasibility does not protect a registered proprietor from the consequences of his own actions where those actions give rise to a personal equity in another.55

Under this head are to be found various categories of proprietary constructive trusteeship, estoppels and miscellaneous equities, such as the equity in Yerkey v Jones.56 Indeed, the fecundity of the equitable jurisprudence of Baumgartner v Baumgartner57, as it applies to land, can only be explained as the application, usually implicit, of the in personam exception to indefeasibility. It would be impossible to bring many of these ‘unconscientious denial of title’ cases within the fraud exception to indefeasibility, at any rate without severe conceptual distortion. Statutory codifications of the ‘personal equities’ exception embraces both categories of case. For example, section 185(1)(a) of the Land Title Act 1984 (Qld) provides that title to land is taken subject to ‘an equity arising from the act of the registered proprietor’. These words are apt to include both expressly created and imposed interests affecting the proprietor’s registered title.58 54 Including omissions. The conduct need not amount to fraud, which constitutes a separate exception to indefeasibility. 55 (1988) 164 CLR 604, 638 (HCA). The boundary between the two categories can be indistinct, as Bahr v Nicolay (No 2) itself illustrates. Mason CJ and Dawson J held that the defendant’s undertaking created an express trust (category 1, in terms of this paper’s analysis), whereas Wilson and Toohey JJ, and on different grounds Brennan J, held that it created a constructive trust (category 2). The different analyses of the defendant’s undertaking provide a good illustration of Birks’s observation that

There is a fine but important distinction between intent conceived as creative of rights, as in an express trust or a contract, and intent conceived as a fact which, along with others, calls for the creation of rights by operation of law (P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, revised edn, 1989) 65). 56 (1939) 63 CLR 649 (HCA). 57 (1987) 164 CLR 137 (HCA). 58 They are not, however, apt to cover the decision of the Queensland Court of Appeal in White v Tomasel [2004] 2 Qd R 438, convincingly criticised by S Christensen and W Duncan, ‘Indefeasibility of Title a Bar to Restitution after Reversal of a Judgment on Appeal’ (2005) 11 Australian Property Law Journal 81. The decision of the Queensland Court of Appeal in Tara Shire Council v Garner [2003] 1 Qd R 556 is closer to the line, but in my view the dissenting

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Say-Dee’s claim cannot be brought within either class of the in personam exception. Mrs Elias and her daughters did not create any equitable right in favour of Say-Dee. Moreover, Say-Dee’s entitlement to equitable relief was not based on any conduct on the part of Mrs Elias and her daughters, who were in good faith and who made financial contributions to the purchase of the properties. If the properties had been sold to them only because they had expressly acknowledged that registration of their titles would be subject to the proposed use of the property for the purpose of the joint venture, the position would have been different. Indefeasibility would then have been rightly defeated by the application of the in personam exception.59 But there was no evidence of any such conduct which might have disqualified them from the benefit of indefeasible title. However, Say-Dee’s failure to recover the properties should not have been the end of the story. Assuming that Farah had committed a breach of fiduciary duty, Say-Dee should have been entitled to an award of equitable compensation against Farah, or against Elias as the controller of the company. Alternatively, Say-Dee should have been awarded a personal remedy against Mrs Elias and the daughters under the first limb of Barnes v Addy for having received the properties in breach of fiduciary duty. It is precisely because a proprietary claim is barred, in this case by reason of the indefeasibility principle, that personal relief comes into its own. This naturally brings us to the question of the grounds upon which a personal remedy will be granted. As a result of the High Court’s decision in Farah, the imposition of equitable liability on recipients under Australian law requires proof of notice, or perhaps knowledge, of the breach of fiduciary duty.60 Although the imposition of liability on the basis of unjust enrichment was rejected by the High Court, or at least placed out of bounds for lower courts, the principle of restitution for unjust enrichment will not be eliminated simply by a restatement of fault-based liability in equity. Many of the cases on the equity side of the divide can be reconceived as common law claims to restitution, argued in the language of money had and received, upon proof of a recognised ground of restitution.61 It will be interesting to see if an unintended consequence of Farah turns out to be a ‘flight from equity’ to common law methods of legal judgment of Davies JA to the effect that there was no relevant ‘act of the registered proprietor’ for the purpose of applying s185(1)(a) is to be preferred to the majority decision on this point. Nonetheless, the High Court in Farah approved Tara: Farah, n 2 above, [194]. Bahr v Nicolay (No 2), n 55 above. Compare Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2007] NSWCA 22 at [134] (‘the notice test of the first limb’) with Farah, n 2 above, [122] (‘knowledge’). 61 State Bank of NSW v Swiss Bank (1995) 39 NSWLR 350 (NSWSC); Port of Brisbane Corp v ANZ Securities ( No 2) [2003] Qd R 661 (QCA) ( where the defence of change of position succeeded); Spangaro v Corporate Funds Management Ltd (2003) 47 ACSR 285 (NSWSC); Westpac Banking Corp v Hilliard [2006] VSC 470 (VSC). 59 60

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characterisation. Correctly applied, the unjust enrichment principle is an expression of legal logic. Even if expelled through the front door by courts of high authority, it will inevitably re-enter through the back door.

VII

CONCLUSION

This paper argues that the High Court got Farah wrong. This is not a simple disagreement on the proper basis of recipient liability under Barnes v Addy, although I suspect that Farah will turn out not to be the last word on this important topic, and Peter Birks’s views may be vindicated even in Australia. Any debate about the nature and role of the first limb of Barnes v Addy should only be an argument about the conceptual basis for personal relief in equity against recipients. As far as the recovery of specific property is concerned, the real objection to Farah is that it overlooks some verities of the law of equitable title.

18 Birks and Proprietary Claims, with Special Reference to Misrepresentation and to Ultra Vires Contracts BI RKS AND PROPRI ETARY CLAI MS

PETER WATTS * PETER WATTS

P

ETER BIR K S BEC AM E a regular visitor to New Zealand in what, very sadly, were to be his latter years. He was due to teach again at Auckland the year he died. The fact that New Zealand was proving much less receptive to unjust enrichment as a cause of action, or indeed as a driving factor in private law, than the United Kingdom did not seem to dim his enthusiasm to be here. It was not that the law profession here was ignorant of his standing as a scholar. Indeed, he had in New Zealand as elsewhere a Hawking-like reputation amongst lawyers, so that his two evening addresses as Legal Research Foundation Distinguished Visiting Fellow, on his first visit to Auckland in 1997, were packed with members of the profession and the judiciary, as well as academics and students. New Zealand’s resistance to a concept of unjust enrichment may yet abate, although there must be some doubt whether this country will ever embrace all aspects of the broader vision of the concept that Birks came to promote in his Unjust Enrichment.1

I

B IRKS’S SCHEME OF PROPRIETARY CLAIMS

The 1997 lectures, under the name ‘Property and Unjust Enrichment: Categorical Truths’,2 have since had a very wide press in the international Professor of Law, The University of Auckland. Note, however, the concessions to orthodoxy he made in the second edition, Unjust Enrichment (Oxford, Oxford University Press, 2nd edn, 2005). 2 P Birks, ‘Property and Unjust Enrichment: Categorical Truths’ [1997] New Zealand Law Review 623. *

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restitution community. They open by referring to the then freshly delivered judgments of the House of Lords in Westdeutsche Landesbank Girozentrale v Islington LBC,3 a case concerned with the after-effects of a finding that a promisor did not have the legal capacity to make the contracts in question. The focus of the lectures was not the particular holdings in that case, but the more fundamental problem of the relationship between the concepts of property and unjust enrichment. The article was, Birks said, the Prince of Denmark without the Prince, since it was not directly concerned with when a proprietary response to a restitutionary claim was appropriate. Birks had already expressed his views on that in a long case note addressed to the merits of the Westdeutsche case (‘the 1996 article’).4 In the 1996 article, as in his earlier article on void, including ultra vires, contracts (‘the 1993 article’),5 there is little sign that Birks contemplated an asymmetric set of proprietary consequences connected to ultra vires contracts: one whereby the party with the lack of power was entitled to proprietary remedies in the recovery of any value transferred, but not the other party (unless also lacking vires).6 This is not an oversight on his part.7 While it seems fair to say that Birks’s support for an expansive proprietary response to unjust enrichment emerged gradually, he had never set himself against the controversial decision in Chase Manhattan Bank v Israel-British Bank.8 That case had upheld an equitable proprietary remedy in favour of the maker of a simple mistaken payment, and in his 1993 article Birks recognised that in many, if not all, cases of ultra vires contracts even the capax party will have made a mistake of law. Such a mistake might, consistently with Chase Manhattan, support a proprietary remedy. Asymmetry, therefore, would not be needed. In the 1996 article, Birks signalled that, though this was an issue where one legal system might reach a different conclusion to another, he now favoured the view that all cases based on a flawed intention (cases of ‘vitiation’) warranted an equitable proprietary remedy. Of course, he made this clear at the very time that the House of Lords, in Westdeutsche, appeared to have moved in the opposite direction. The majority of the House had expressly overruled its earlier decision in Sinclair v Brougham,9 where capax parties to ultra vires contracts had been given a proprietary remedy. [1996] AC 669 (HL). P Birks, ‘Trusts Raised to Reverse Unjust Enrichment: the Westdeutsche case’ [1996] Restitution Law Review 3. 5 P Birks, ‘No Consideration: Restitution after Void Contracts’ (1993) 23 University of Western Australia Law Review 195. 6 For a rare instance of double ultra vires, see Tauranga Borough v Tauranga Electric Power Board [1944] NZLR 155 (NZCA). 7 Birks does indicate that the incapax corporation may have a stronger claim to proprietary remedies: Birks, n 5 above, 202 note 25. 8 [1981] Ch 105 (HC). 9 [1914] AC 398 (HL). 3 4

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Birks felt able to maintain his stance for two reasons. First, the claimant had not based its claim on mistake or other vitiating event, which meant that any statements about proprietary remedies for mistaken payments could only have been obiter dicta. Secondly, Lord Browne-Wilkinson, whose speech commanded majority support (though all five judges ruled against a proprietary right on the case as pleaded), was not prepared to overrule or even disparage Chase Manhattan, notwithstanding his preparedness to overrule Sinclair. Instead, he held that no equitable proprietary interest arose upon receipt of a mistaken payment unless and until the recipient became aware of the mistake. Birks convincingly argued that Lord Browne-Wilkinson’s gloss on Chase Manhattan was not very sensible. It created a type of springing proprietary interest that entailed, unless a distinction were to be drawn between mistakes of fact and mistakes of law, that Sinclair had all along been correctly decided if only the claimants had based their case on mistake. Although Birks’s analysis of Westdeutsche was technically sound, only a confidence that ubiquitous proprietary remedies were the optimal solution for the common law could have justified his discounting the clear tenor of the speeches of Lords Goff of Chieveley and Browne-Wilkinson.10 That tenor was that personal restitutionary remedies were sufficient to the merits of most restitutionary claims.11 Between the 1993 article and his Unjust Enrichment,12 Birks undertook a volte face on the way to approach the unjustness element in the cause of action in unjust enrichment, for which he remained a crusader. The main purpose of the 1993 article was to argue against the view that all enrichments (including those involving simple property transfers) were unjust unless there were a (legally) valid reason for them. Such a starting point might be appropriate in a Roman law system (reflected in the condictio indebiti), but it did not fit with the common law. Unjust Enrichment, however, argued that the idea of the condictio indebiti was, after all, the way forward for the common law. On this approach, it was not necessary for a claimant to identify the flaw that induced the conferral of the benefit; it was sufficient to show that there was no valid reason why the enrichment should have occurred. 10

Lord Goff stated ([1996] AC 669, 689):

Professor Birks has argued for a wider role for the resulting trust in the field of restitution, and specifically for its availability in cases of mistake and failure of consideration. His thesis is avowedly experimental, written to test the temperature of the water. I feel bound to respond that the temperature of the water must be regarded as decidedly cold. 11 It should be noted that the highly problematic decision of the House of Lords in Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 might be taken to give indirect support to the Chase Manhattan decision. Compare P Watts, ‘Subrogation—A Step Too Far’ (1998) 114 LQR 341 with D Friedmann, ‘Payment under Mistake—Tracing and Subrogation’ (1999) 115 LQR 195. 12 Birks, n 1 above.

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This conversion did not require Birks to review his advocacy of a broad base to proprietary claims in unjust enrichment. If anything, the integrity of the no-cause conception of unjustness strengthened the case for an all-embracing proprietary response. It also reinforced Birks’s opposition to Westdeutsche. In fact, in Unjust Enrichment he came to advocate a binary approach to proprietary remedies.13 The dichotomy was between cases of ‘initial failure of basis’ and cases of ‘subsequent failure of basis’. Only where, at the time of the conferral of the benefit, there was a valid reason for its taking place ought proprietary rights to be denied; this was the class of ‘subsequent failure’. Most cases of vitiated transfer, including instances of ultra vires contracts, would fall into the ‘initial failure’ category. It is to be inferred, though he did not develop the point, that Birks favoured a proprietary response which adopted the characteristics of equitable proprietary interests; these have a less aggressive profile than common law property rights. The basic rationale of Birks’s dichotomy is that defendants in the category of initial failure never had any entitlement or right to the value received, whereas those in the subsequent failure category did, it being assumed that claimants in the latter category envisaged the defendant as having unrestricted access to the asset received whatever duties might subsequently arise. This two-class model is certainly elegant, and intelligible. That is not to say that there may not be penumbra between the two categories. In particular, not everyone would agree with Birks’s treatment of Neste Oy v Lloyds Bank plc14 as a case of initial failure. Here, a payment for shipping services was made after the directors of the payee shipping agency had determined that it should cease to trade and would accordingly not be performing the services. Bingham J, as he then was, held that the moneys paid were held on trust for the claimant, even though the parties had not provided for that to happen. Birks argued it was certain at the time of the payment that the promised counter-consideration was not to be forthcoming, and for that reason the claimant’s ‘putative contractual obligation did not exist’. ‘An attack on Neste Oy is an attack on Chase Manhattan’, he said.15 This conclusion is not beyond question. The shipping agency may have repudiated the contract, as Birks notes, but this would not of itself have brought its contractual obligations to an end; as Asquith LJ stated in Howard v Pickford Tool Co Ltd,16 ‘an unaccepted repudiation is a thing writ in water’, and the decision to repudiate had not even been communi13 Birks gave due acknowledgement to R Chambers, Resulting Trusts (Oxford, Oxford University Press, 1997) 155–70. 14 [1983] 2 Lloyd’s Rep 658 (HC) (also known as The Tiiskeri). 15 N 1 above, 187. 16 [1951] 1 KB 417, 421 (CA).

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cated to the claimant. This may seem a quibble, but it is not inconceivable that a company in the position of the agency might at the last minute have benefited from an unexpected receipt which would have enabled the contract to continue. For instance, it might have received an extremely high price for some land it owned. This might still leave the possibility that a claimant in the position of the shipowner in Neste Oy could argue that in making the payment it was unaware of its right to terminate the contract, and that on that account its payment was voidable.

II

CRITICISM OF BIRKS’S SCHEME

Elegant and intelligible though Birks’s model is, it is neither the only such model nor necessarily the optimal one. An alternative solution, not much (if any) less elegant, is the one settled upon by the common law judges; namely, only where there was no consent at all to the transfer of title to an asset to the defendant should proprietary consequences follow. These consequences might be both legal and equitable.17 All other claims based on a flawed transfer of assets are personal. The simplicity of this approach has to be qualified somewhat by the fact that a long line of authority supports the concept of a voidable title arising where the transfer was induced by the transferee’s fraud. It is probable too that title in property does not pass if obtained by duress to the person; in some cases robbery would be involved.18 William Swadling, however, has argued that the fraud cases have a suspect pedigree, and has managed to convince Lord Millett, extrajudicially, of this.19 The merits of this argument will be addressed below.20 Birks’s model, it is argued here, has two main weaknesses21: the class of initial failure embraces too much to make it the best basis for deciding 17 Notwithstanding Foskett v McKeown [2001] 1 AC 102 (HL), it seems impossible to deny the role of equity as a reinforcer of common law claims: see John v Dodwell & Co [1918] AC 563 (HL); Guinness plc v Saunders [1990] 2 AC 663 (HL). 18 R v Parker [1919] NZLR 365 (NZCA). 19 See W Swadling, ‘Rescission, Property, and the Common Law’ (2005) 121 LQR 122; P Millett, ‘Proprietary Restitution’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Thomson, 2005) 320. 20 One other complexity arises out of the debate whether proprietary claims based on lack of consent are restitutionary or property based, or both (in addition to Birks, n 2 above, see R Grantham and C Rickett, ‘Property and Unjust Enrichment: Categorical Truths or Unnecessary Complexity?’ [1997] New Zealand Law Review 668; P Watts, ‘Property and Unjust Enrichment: Cognate Conservators’ [1998] New Zealand Law Review 151). Those who argue that cases of no consent are not cases of unjust enrichment but who also disfavour proprietary remedies for unjust enrichment would conclude that remedies for unjust enrichment are always personal. 21 Without a general proprietary remedy over the defaulting party’s assets, Birks’s scheme is also incapable of providing a proprietary remedy in a case where the claimant pays by way of set-off against wages or other debts (as in Fortex Group Ltd v Macintosh [1998] 3 NZLR 171 (NZCA)), even though the justice of the claimant’s case is as strong.

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who is to get a proprietary remedy: and it is too easy for a claimant to manufacture the evidence to place himself or herself in the class. Even if one ejects Neste Oy from the category of initial failure, on the basis that it was a case of a payment made under a contract in respect of which there had been, at most, an unaccepted anticipatory repudiation, that seems still to leave other cases of failure of contractual performance within it. Take the case of a contract to sell goods, where, as usual, payment and delivery are interdependent conditions. Where the goods contain a hidden defect that makes them not of merchantable quality, the buyer strictly speaking never had a duty to make the payment. If this example falls within the category of initial failure, there will be many instances of contract claimants switching to a restitutionary claim where they find their seller has become insolvent but the purchase moneys remain identifiable. It will be rare where the defect in non-conforming goods was not at least latent at the time of payment. Should we put such contract claimants in a better position than those who find that the failure of contractual reciprocation occurs only after payment? Should not they both have to provide for an express trust of their payment pending due performance by the promisor before proprietary rights arise? It might be argued that the answer to the sale of goods example is that it, like Neste Oy, is a case of subsequent failure. The argument would be that the buyer has a duty to pay once he or she accepts delivery of apparently conforming goods. The seller’s failure to deliver conforming goods is a repudiatory breach but nothing more until the buyer elects to reject them. However, the contrary argument would be that a buyer is never under an obligation to pay for non-conforming goods even if neither party is aware of that at the time of delivery. It is true that the seller might have refused to hand over the goods without receiving payment, but that fact is of no legal significance. So, if the goods do not conform, a buyer would commit no breach by taking a gamble on their condition and withholding payment immediately after taking delivery. Formal rejection could, and would have to, follow later. Similar issues of over-inclusiveness with Birks’s model can arise where there can have been no question of the claimant ever having been liable to make the payment that was made. Take the case of a claimant who doubts that a payment is due to the defendant, and is right, but thinks it simpler to pay and to check later.22 Unless the payee has made a firm demand and signalled its uncompromising belief in its entitlement (albeit misguidedly), a restitutionary claim should be available to the payer in such a case. (Indeed, it is arguable that a restitutionary claim should be available in such circumstances where the payer is quite confident the money is not 22 A case in this pattern is Nurdin and Peacock plc v DB Ramsden and Co Ltd [1999] 1 All ER 941 (Ch). The reasoning in this case is defective, but the result is right.

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owed but considers for pragmatic reasons it is better to pay up first). But if the payee proves insolvent, should the payer have a proprietary claim, given his doubts? The payer foresees his right to a restitutionary claim, and might be expected to stipulate for a trust in the same way as an ordinary contractual creditor. Once more, it might be argued that cases of this sort are cases of subsequent failure, not initial failure; the payer did mean the payee to have the money subject to his subsequent checking. If that be right, it then raises the other objection to Birks’s analysis. How are we to know whether a payer had these doubts, when in many cases the only evidence will be within the payer’s mind alone? It will be very easy for the unscrupulous payer simply to say that it never crossed her mind that she was not liable to make the payment.23 In any event, it seems odd to treat the unthinking payer more favourably than the thinking one in these circumstances. At the same time, it also seems rather arbitrary to give the thinking party a proprietary claim when his thinking leads to his taking the same risk as a contractual payer who later finds his debtor is insolvent. In the result, it is argued that it would be better to accept the direction in which Westdeutsche was clearly intending to move, which was back to a non-proprietary approach to restitutionary claims. We should, however, reject Lord Browne-Wilkinson’s attempt to provide a refuge for Chase Manhattan. It should be expelled, along with Neste Oy.24

III

T H E PO S I T I O N O F MI S R E P R E S E N TAT I O N

What of the long line of cases, dating back 200 years, that recognises that a mistake induced by fraud might lead to a power in the payer to revest proprietary rights in himself?25 Although Swadling is at the opposite end of the spectrum from Birks on proprietary claims, he, with Birks, deprecates mixing wrongdoing with the cause of action in unjust enrichment. They both, thus, treat the representor’s role in inducing a mistake as irrelevant to the issue of proprietary remedy; a mistaken payer either has proprietary rights or he does not. In the result, Birks used the line of misrepresentation cases as evidence that plain mistake generated a proprietary claim, whilst 23 Similar objections can be made to Chambers’s argument that the resulting trust should be expanded to embrace mistaken payments: R Chambers, ‘Resulting Trusts’ in A Burrows and A Rodger (eds), Mapping the Law (Oxford, Oxford University Press, 2006) ch 13. 24 Both Chase Manhattan and Neste Oy were doubted by Rimer J in Shalson v Russo [2005] Ch 281, 320 (HC). 25 In New Zealand, the right to rescind for misrepresentation has been abrogated and replaced with a statutory judicial discretion (see Contractual Remedies Act 1979, s 9). One might expect the courts to follow the common law in exercising the discretion.

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Swadling argues that the cases should be condemned, along with Chase Manhattan. Logic, it is suggested, does not dictate that simple mistake and induced mistake be treated alike for the purposes of proprietary claims. It is a question of policy where lines should be drawn in weighing the interests of someone who has parted with their property as a result of a flawed transaction against those of downstream recipients. Once the law concluded that the generation of proprietary claims is determined by the claimant’s conduct and state of mind, it is not irrational that the law might also conclude that the fact that the relevant transfer was wrongly induced by the first recipient might justify at least some different outcomes for parties who derive their title through the inducer than those that arise out of a simple mistaken transfer. It might also be observed that there is irony in the line that Birks draws between the events ‘wrongs’ and ‘unjust enrichment’; he places conversion and detinue in the category of wrongs, even though they are the shop front of proprietary claims. As to policy, if induced errors provide stronger claims to proprietary remedies than self-induced errors, then it can be argued, in turn, that inducement by fraud makes a stronger case than inducement that is merely negligent or blameless. At the same time, the fact that the victim of fraud, unlike the victim of theft, was an active player in the chain of events that led to the asset being in the defendant’s hands suggests that his claim will usually be less compelling than the victim of theft’s claim. It is perhaps not surprising that, given the spectrum of factors that can induce a disposition of assets, intermediate solutions might be devised for intermediate cases. This is what the line of fraud cases does. It provides that title to assets initially passes despite the transferee’s fraud, but that it can be recovered by the transferor’s giving, once she discovers the misrepresentation, a sufficiently patent signal that she is reclaiming a proprietary interest. The evident purpose of this concept of a voidable title is to protect the interests of third parties who take an interest in the asset from the representee before the claimant purports to retake it. There remain difficult questions as to which third parties should be protected by the concept and as to what type of interest the claimant obtains upon rescission of the transaction.26 Turning next to the authorities, it is to Baron Parke that credit is given for devising, or at least adopting into law, the concept of the voidable 26 Swadling, n 19 above, bases part of his criticism of the concept of voidable title on the fact that there is no necessary connection between the validity of a contract of sale and the validity of the passage of title to assets the subject of that contract. That is true, but the contract is valid to pass title until avoided, which makes delivery legally irrelevant to movements of title: see B Häcker, ‘Rescission of Contract and Revesting of Title: A Reply to Mr Swadling’ [2006] Restitution Law Review 106. Further, even if delivery was effective to pass title, it would not follow that rescission could not reverse both the contract and the effect of delivery.

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transaction in cases of fraud.27 The idea was, however, almost certainly current before Parke B promoted it in Load v Green.28 Hence, it was the basis of the argument of Liddledale, counsel for the defrauded party, in Gladstone v Hadwen in 1813.29 Interestingly, Liddledale argued in the alternative for a legal or an equitable power to revest for fraud, and Lord Ellenborough upheld the equitable claim without expressly rejecting the legal claim. Swadling is correct in arguing that the case law on the rights of the victim of fraud before Load v Green was contradictory. It is not clear, however, that he is right to argue that a sea change in favour of the victim of fraud started to occur as late as 1810. In fact, in Harrison v Walker in 1792, Lord Kenyon had held that the victim of fraud was entitled to trace against the assignees in bankruptcy of the fraudster the proceeds of the bill of exchange which the fraudster procured from the victim.30 The report has Lord Kenyon stating: ‘The assignment under the commission passes only such property as the bankrupt is conscientiously entitled to.’ Lord Kenyon appears to have adhered to this view in Wright v Lawes.31 The latter case only was relied upon by Parke B in Load v Green. The leading authority used by Swadling to argue that under earlier law fraud did not raise proprietary rights, Haswell v Hunt,32 is not, with respect, as clear an authority as he suggests. In particular, there is no express finding that the bankrupt had intended to defraud the claimant in ordering the relevant goods, as opposed to his creditors generally. He fled the country almost immediately after ordering the goods, but, significantly, without waiting for the goods to be delivered. A search of the database The Making of Modern Law33 reveals that the case is cited in a number of early books on bankruptcy and sale, but not on the footing that the particular transaction was fraudulent. And in E Christian’s The Origin, Progress, and Present Practice of the Bankrupt Law it is expressly treated as not a case of fraud.34 Swadling is on better ground in his citation of Milward v Forbes.35 This case seems not to have had the same impact in the contemporary 27 See Swadling, n 19 above, and J Bunbury, A History of the Action of Deceit on the Case and Related Developments in Contract Law (PhD thesis, University of Auckland, 2005) ch 14. 28 (1846) 15 M & W 216 (Exchequer). See also Ferguson v Carrington (1829) 9 B & C 59 (KB); Strutt v Smith (1834) 1 Cr M & R 312 (Exchequer). 29 (1813) 1 M & S 517 (KB). 30 (1792) Peake’s NP 150 (KB). Martin v Pewtress (1769) 4 Burr 2477 (KB), which Swadling also cites, is concerned with dispositions by the bankrupt in fraud of creditors, rather than dispositions to bankrupts induced by their fraud. 31 (1801) 4 Esp 82 (KB). 32 Noted 5 TR 232 (KB). 33 Making of Modern Law (Thomson Gale). 34 (London, W Clarke, 1812) vol 2, 453. 35 (1802) 4 Esp 171 (KB).

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textbooks as Harrison v Walker, with which it is difficult to reconcile on this point. The incongruity of Milward and Harrison is noted by E Deacon in his The Law and Practice of Bankruptcy.36 Lord Ellenborough’s dictum in Milward is in turn difficult to reconcile with his own later decisions in Gladstone v Hadwen, above, and Read v Hutchinson.37 It ought also to be observed of the facts of the cases that Swadling relies on for his argument that none involved an attempt by the defrauded party to reclaim the asset before it had got into the hands of third parties or assignees in bankruptcy. Although, as we will shortly see, it may be possible to rescind a fraudulent transaction post-bankruptcy, the case for rescission before bankruptcy is stronger. In Haswell v Hunt, quite apart from the fact that it is not clear that there was fraud, the attempt to recover the goods occurred after the bankruptcy had commenced. In Parker v Patrick,38 the contest was between a pledgee, with whom the fraudster had pledged the goods, and the defrauded party. As a good faith acquirer of a possessory interest before the defrauded party recovered possession, the pledgee would have succeeded even if the fraudulent pledgor had been held to have a voidable title. Similarly, in Milward v Forbes, above, and Sinclair v Stevenson39 the victim’s attempt to recover his property occurred after the fraudster had committed acts of bankruptcy, which would have started the bankruptcy process running. Whatever doubts there may have been about the rights of the victim of fraud before Load v Green, after that decision the courts seem fairly consistently to have accepted that the fraudster obtains only a voidable title to assets obtained by his fraud. Many of the later English decisions are to be found in Swadling’s article; the number of cases is formidable, even if in many instances the point is only obiter.40 There might be room for clarification, however, on two issues: (i) is the right to rescind only equitable?; and (ii) do bankruptcy and liquidation put an end to the right? (London, J and WT Clarke, 1827) vol 1, 321. (1813) 3 Camp 352 (KB). (1793) 5 TR 175 (KB). (1825) 2 Bing 514 (CP). See Powell v Hoyland (1851) 6 Ex 67 (Exchequer); White v Garden (1851) 10 CB 919 (Common PLeas); Stevenson v Newnham (1853) 13 CB 285 (Exchequer); Kingsford v Merry (1856) 11 Ex 577 (Exchequer); Clough v London & Northwestern Railway (1871) LR 7 Ex 26 (Exchequer); Cundy v Lindsay (1878) 3 App Cas 459, 464, 466 (HL); Re Eastgate, ex p Ward [1905] 1 KB 465 (KB); Tilley v Bowman Ltd [1910] 1 KB 745 (KB); Whitehorn Brothers v Davison [1911] 1 KB 463 (CA); Car & Universal Finance Ltd v Caldwell [1965] 1 QB 525 (CA); Lewis v Averay [1972] 1 QB 198 (CA); El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 (HC), revised on other grounds [1994] 2 All ER 685 (CA); Bristol and West Building Society v Mothew [1998] Ch 1, 22 (CA); Barclays Bank plc v Boulter [1999] 1 WLR 1919 (HL); Twinsectra Ltd v Yardley [1999] Lloyd’s Rep Bank 438 (CA), affirmed [2002] 2 AC 164 (HL); Shalson v Russo [2005] Ch 281 (HC). 36 37 38 39 40

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Is the Right Only Equitable?

As seen above, one of the earliest cases, Gladstone v Hadwen, upheld only a right to rescind in equity. The case is one at King’s Bench, but it was usual for common law judges to take account of equitable interests in bankruptcy cases, since the bankruptcy jurisdiction was divided between Chancery and King’s Bench.41 If the jurisdiction were equitable only, this would permit a bona fide purchaser of a legal interest in the relevant assets to prevail over the rescinder’s equitable interest even after rescission had taken place, up until the rescinder had obtained orders to realise his interest. It would also make more secure the position of a person who acquires only an equitable interest in the asset before rescission. If the rescinder obtains a full legal interest, it may be necessary, if the holder of the intervening equitable interest is to defeat the legal right to rescind, to show that the rescinder had actual or constructive knowledge of the intervening equitable interest at the time of rescission.42 The fact is, however, that many of the cases in the line at least assume that in instances of fraud there can be avoidance at law, and that a full legal title reverts to the victim upon rescission. Even before Gladstone v Hadwen, in Harrison v Walker the court permitted the victim to bring a common law claim against the possessor of the relevant asset; in that case, the claim against the assignee was in money had and received because the original bill of exchange had been converted into cash. Load v Green also upholds an action by the victim in trover against the defendant assignees in bankruptcy.43 More recently, the right to rescind and recover full legal title was upheld by the English Court of Appeal in Car & Universal Finance Ltd v Caldwell.44 In many other cases in the line, however, the issue did not arise, usually because the victim had already regained possession, and it was the assignee in bankruptcy who was the claimant.45 There is sufficient weight in the authorities in favour of rescission at law in relation to fraud to conclude that only the House of Lords could determine otherwise as far as England is concerned. It is equally clear,

41 See J Oldham, English Common Law in the Age of Mansfield (Chapel Hill, NC, University of North Carolina Press, 2004) ch 4; L Smith ‘Tracing in Taylor v Plumer: Equity in the Court of King’s Bench’ [1995] Lloyd’s Maritime and Commercial Law Quarterly 240. 42 Cf Shalson v Russo [2005] Ch 281, 323 (HC). 43 Revesting of common law title was also accepted or assumed in: Small v Attwood (1831) Younge 407, 519, 535 (HL) (revised on facts 6 Cl & F 232 (HL)); Kingsford v Merry (1856) 11 Ex 577 (Exchequer); Whitehorn Bros v Davison [1911] 1 KB 463 (CA). 44 [1965] 1 QB 525 (CA). 45 See, eg Clough v London & Northwestern Railway (1871) LR 7 Ex 26 (Exchequer). The victim had regained possession before trial. The Court of Exchequer Chamber held that it was sufficient to conclude that the victim had rescinded the transaction in equity, but indicated that the victim probably had the right to rescind also at law.

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however, that it is only equity that recognises a right to rescind for non-fraudulent misrepresentation.46

B Do Bankruptcy and Liquidation Determine the Right to Rescind? There is somewhat more room for argument that the right to rescind for misrepresentation is terminated by the formal insolvency of the representor, and probably also, in the case of a tracing claim against downstream recipients, by the insolvency of any such recipient, be it a purchaser with knowledge of the victim’s claim or a volunteer. It may be that a distinction can, and has to, be drawn between fraudulent and non-fraudulent misrepresentation. It is also necessary to consider whether personal bankruptcy and company liquidation have the same effect. The issues are approached first as if there were a tabula rasa, since the cases in point have not been fully reasoned. It is remarkable after all this time that there are not definitive answers to the issues that formal insolvency raises in relation to misrepresentation. The focus will be on rescission for fraud. It is, of course, established that a good faith acquirer for value of an interest from a fraudster is immune to the claim of the victim; this is the whole point of the fraudster’s title being voidable only.47 It seems, however, that neither an assignee in bankruptcy nor a liquidator can be described as a purchaser for value, even if it be assumed for the moment that legal or equitable title in the insolvent’s assets generally vests in holders of both offices. It is more arguable that the creditors whom they represent are a type of purchaser—a point returned to below. There are two routes by which it might be concluded that formal insolvency ends, or at least suspends, the right of rescission. One is for the common law, and equity, to have so determined as part of the development of their rules governing fraud and misrepresentation. The other is for this to have been expressly or impliedly provided for by the statutes that create the bankruptcy and liquidation regimes. Even the first route would seem to involve the courts in some consideration of the purposes of the statutory regimes. If one starts by asking whether the judges themselves could recognise formal insolvency as barring rescission, one comes up against the difficulty that it has not been conventional for common law rules to take account of purely statutory regimes as part of their fabric. Some judges have been prepared to create tortious duties of care on the part of those charged with 46 Alati v Kruger (1955) 94 CLR 216, 223–4 (HCA); O’Sullivan v Management Agency and Music Ltd [1985] QB 428, 457 (CA). 47 See White v Garden (1851) 10 CB 919 (Common Pleas); Stevenson v Newnham (1853) 13 CB 285 (Exchequer); Cundy v Lindsay (1878) 3 App Cas 459 (HL); Whitehorn Bros v Davison [1911] 1 KB 463 (CA).

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the exercise of statutory powers, being duties that are said to arise independently of the relevant statute.48 Such developments remain methodologically dubious. Equity has, however, some history of taking account of statutory regimes, the best instance being its application by analogy of statutes of limitation.49 To the extent that the right to rescind turns on equitable jurisdiction, it might be possible, therefore, for the courts to conclude that the right is determined by the intervention of formal insolvency. However, if the common law recognises a right to rescind for fraud that is unaffected by formal insolvency, it would be odd for equity to then take it away. As for the insolvency regimes themselves, the regimes that have served as models round the Commonwealth have not made express provision for the effects of misrepresentation. The standard bankruptcy regime has provided for all the bankrupt’s assets to vest in assignees in bankruptcy.50 One might take this as a signal that the legislature intended to treat assignees as in the same position as a good faith purchaser. However, it is more likely that vesting was designed to prevent the bankrupt having any on-going powers of disposition, and possibly also as part of the process by which individual creditors are thwarted from levying execution on the assets. That insolvency regimes are focused on disabling the insolvent party, rather than altering the status of proprietary claims, is corroborated in relation to companies by the fact that the standard liquidation regime does not provide for the company’s assets to vest in law in the liquidator. It does not need to. It is enough to ensure that the liquidator assumes control of the company’s assets, and the directors and shareholders lose their control; the company cannot do anything by itself. As it happens, English law appears to have concluded that a trust of the company’s assets in favour of its creditors does arise upon liquidation in Ayerst v C & K (Construction) Ltd.51 However, the High Court of Australia has declined to follow this conclusion.52 That Court held that legal and beneficial ownership of a company’s assets remains with the company despite the liquidation. Although company insolvency regimes have not provided for the insolvent company to be divested of its assets, they have tended to be more explicit than bankruptcy regimes that there are not to be post-insolvency 48 Invercargill City Council v Hamlin [1994] 3 NZLR 513 (NZCA); South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282, 297–8 (NZCA). For academic advocacy, see G Gunasekara, ‘Judicial Reasoning by Analogy with Statutes: Now an Accepted Technique in New Zealand’ (1998) 19 Statute Law Review 177. 49 See R Meagher, J Heydon and M Leeming, Meagher, Gummow & Lehane’s Equity—Doctrines and Remedies (Sydney, LexisNexis, 4th edn, 2002) 1015–18. 50 See Insolvency Act 1986, s 306 (UK); Insolvency Act 2006, s 64 (NZ). 51 [1976] AC 167 (HL). 52 Commissioner of Taxation v Linter Textiles Australia Ltd (2005) 220 CLR 592 (HCA).

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dispositions of assets away from the insolvent party. The company provisions have protected, expressly or impliedly, dispositions made by a secured creditor in realising its security, but otherwise they have been expressed in the passive, in a way which could embrace dispositions at the hands of a party other than the company itself. The current United Kingdom provision, section 127(1) of the Insolvency Act 1986, provides53: In a winding up by the court, any disposition of company’s property, . . . made after the commencement of the winding up is, unless the court otherwise orders, void.

On their literal wording, therefore, these provisions could be used to preclude a victim of fraud or other misrepresentation from rescinding a transaction post-liquidation in an attempt to reclaim assets transferred.54 Apart from these provisions, there are two background insolvency principles that have been prominent in insolvency law for several centuries, even if not explicit in the legislation itself. One of these might be thought to favour the victim of fraud, the other not. The first is that the assignees in bankruptcy (and liquidator) stand in the same position in relation to third parties as the bankrupt. The other is that, so far as possible, bankruptcy laws should be construed to favour the body of creditors.55 The two principles were juxtaposed in the following way by Cooke56: The creditors and assignees of a bankrupt stand in his place and are subject to the same equity, and bound by all acts fairly done by him; for although the court will favour creditors as much as they [sic] can, it must be where they have a superior right to other persons.

The first principle is, in terms, capable of supporting a right to revest after bankruptcy. The principle has, however, primarily been used as the mechanism by which assignees have been required to recognise property

53 There is now an equivalent provision in the UK for bankruptcies, Insolvency Act 1986 s 284, but it is not expressed in the passive and applies only where the disposition is made by the bankrupt. 54 New Zealand’s equivalent provision is now even more explicit. Section 248(c) of the Companies Act 1993 provides:

Unless the liquidator agrees or the Court orders otherwise, a person must not— (ii) Exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company. When coupled with the fact that rescission now requires the exercise by a court of a discretion (see n 24 above), it might be doubted whether a proprietary remedy would be granted to a victim of fraud. 55 Cf Serjeant le Blanc, counsel in Smith v Coffin (1795) 2 H Bl 444, 452 (Common Pleas and Exchequer), who stated: The statute 21 Jac. 1, c. 19, also declares that all the statutes and laws concerning bankrupts shall be largely and beneficially construed, for the relief of creditors. 56 W Cooke, The Bankrupt Laws (London, E&R Brooke, 2nd edn, 1788) 318.

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rights arising before the commencement of the bankruptcy, both legal and equitable: Nothing vests in these assignees even at law but such real and personal estate of the bankrupt in which he had the equitable as well as the legal interest.57

It might stop short of supporting a power to revest rights if the power has not been exercised before bankruptcy. The assignees would have obtained legal and beneficial title upon their appointment.58 As for the merits, there is much to be said for formal insolvency ending the right to rescind. Other creditors will upon bankruptcy have lost the right to levy execution on the debtor’s assets, including those obtained by the debtor’s fraud, and in that respect their position is analogous to that of a bona fide purchaser. The general policy of the concept of a voidable title is to give the victim a locus poenitentiae, rather than absolute rights. It is true that if the right to rescind is lost the other creditors might be said to benefit from the debtor’s dishonesty, but windfalls are intrinsic to an insolvency regime; there will likely be other victims of fraud among the unsecured creditors. As for the authorities, the following cases have upheld a rescission that occurred after the commencement of bankruptcy: Harrison v Walker; Load v Green; Re Eastgate, ex p Ward,59 and Tilley v Bowman Ltd.60 Plainly, the first two of these are leading cases, and all four are decisions of eminent judges.61 In most of the numerous other cases in the line, the issue did not arise; the rescission had occurred before bankruptcy, or the contest was with someone other than an assignee or liquidator. There is little authority that goes the other way. One case is Milward v Forbes, discussed above, where, however, the possibility of a voidable title was not considered. In Re Goldcorp Exchange Ltd, Lord Mustill, for the Privy Council, in obiter dicta, cast doubt upon Re Eastgate.62 It is possible to read this dictum as confined to instances of non-fraudulent misrepresentation. The fact is, however, that there had been fraudulent misrepresentations in Goldcorp; so much was decided at first instance, though without naming the individuals concerned.63 However, Lord Mustill concluded that the victims had not pleaded a right to rescind the contracts, which meant the court did not have to rule on the issue. Further, Scott v Surman (1743) Willes 400, 402 (Common Pleas). See Barclays Bank plc v Boulter [1999] 1 WLR 1919, 1925 (HL); Shalson v Russo [2005] Ch 281, 321 (HC); Cripps v Lakeview Farm Fresh Ltd [2006] 1 NZLR 238, 256 (NZHC). Cf Swadling, n 19 above, 132–3. 59 [1905] 1 KB 465 (KB). 60 [1910] 1 KB 745 (KB). 61 Respectively: Lord Kenyon; Parke B (later Lord Wensleydale); Bigham J (later Viscount Mersey); and Hamilton J (later Viscount Sumner). 62 [1995] 1 AC 74, 103 (PC). 63 HC Auckland, M1450/88, 17 October 1990, Thorp J, 110. 57 58

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the contest was between the victims of the fraud and the holder of a pre-rescissionary security interest, which clearly was a bona fide purchaser of at least an equitable interest. More recently, Rimer J in Shalson v Russo, in obiter dicta, considered that liquidation terminated the right to rescind for fraud.64 He relied on the Ayerst principle as to creditors obtaining a beneficial interest in the company’s assets upon liquidation. To sum up to this point, if it were not for the early cases, the law might well have concluded that rescission for fraud was determined by bankruptcy. It may not be too late to depart from those authorities, which are not very numerous though of long standing. Although it would be desirable for the position not to vary as between bankruptcy and liquidation, it is strongly arguable that rescission post-liquidation is now inconsistent with the companies legislation. It is equally remarkable that there is very little case law on the effect of formal insolvency on the right to rescind for non-fraudulent misrepresentation. There, equity alone would recognise a right to rescind. Although equity regards a contract rescindable only in equity as giving a sufficient right in the claimant to be devisable or assignable before rescission,65 it seems that it may be necessary for a court to make the order for rescission before it takes effect.66 If this is right, it contrasts with rescission at common law, which is said to arise as of right and to be the act of the victim.67 This fact, together with equity’s greater willingness to notice the existence of statutory provisions in formulating its jurisdiction, would suggest that courts could conclude that the intervention of formal insolvency ordinarily precludes the making of an order to revest property in claimants. Further, it is more difficult to justify giving a proprietary remedy to the victim of innocent misrepresentation vis-à-vis a merely mistaken party than it is to the victim of fraud.

IV

ULT R A VI R E S T R A N SAC T I O N S

The gist of this essay so far has been that Birks’s scheme for giving proprietary rights within the law of restitution should be rejected, and that a confining approach should be taken to proprietary claims for misrepresentation. This leaves unaffected, however, the possibility of asymmetric proprietary remedies where assets are transferred under ultra vires transactions. Where a party with general competence finds that it has dealt with an [2005] Ch 281, 323 (HC). See Gresley v Mousley (1859) 4 De G & J 78 (CA Chancery). See Meagher et al, n 49 above, 865. Reese River Silver Mining Co v Smith (1869) LR 4 App Cas 64, 73 (HL); Alati v Kruger (1955) 94 CLR 216 (HCA). 64 65 66 67

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incapable party, then, on the basis of dicta in Westdeutsche and the arguments made in this essay, it will usually have available to it only a personal restitutionary claim. At best, the capax claimant will have made a mistake only. However, where the party seeking restitution is the incapax party, it can argue that it gave no legally valid consent at all to the transfer. This is particularly the case where that party is an incorporation.68 There, any asset transferred will have been transferred by a purporting agent who had no actual authority. It is a taking without consent from the corporation’s point of view. Proprietary remedies ought to follow as a matter of course. This is not to say that there may not be rules that immunise from liability recipients who have neither actual nor constructive knowledge of the lack of the claimant’s capacity. There has never been a common law rule, it is argued, that a mere lack of capacity makes a transfer of assets invalid where the outsider has given value and could not have been expected to have known of the incapacity.69 It is surprising that the asymmetry of restitutionary rights between the parties to ultra vires transactions was not alluded to in Westdeutsche. The fact remains that it was not necessary to do so because the claimant in that case was the capax bank rather than the incapax local authority. Nor is the asymmetry affected by the overruling in Westdeutsche of Sinclair v Brougham, because Sinclair too involved a capax party suing an incapax building society. There is plenty of authority, however, for the view that a corporation the property of which has been disposed of without authority can reclaim that property both at common law and equity, including through the use of tracing claims. Persons who purport to commit a corporation to an ultra vires transaction act without authority. Rolled Steel Products (Holdings) Ltd v British Steel Corporation is one illustration of a successful proprietary claim.70 In fact, the English Court of Appeal in that case wrongly, it is submitted,71 treated the plaintiff company’s failure to comply with its memorandum of association as not engaging issues of vires, but only of excess of directors’ powers. For present purposes that only strengthens the argument; if equitable proprietary remedies were available in Rolled Steel then they would be available a fortiori in a case of ultra vires.72 There is no reason to assume that Westdeutsche has cast any doubt on these authorities.

68 The legal effect of incapacity in humans has generally been treated more flexibly: see Birks, n 5 above, 222–4; A Burrows, The Law of Restitution (London, Butterworths, 2nd edn, 2002) ch 10. 69 See P Watts, ‘The Rolled Steel case and the Memorandum of Association in New Zealand Company Law’ [1986] New Zealand Law Journal 270. 70 [1986] Ch 246 (CA). 71 See Watts, n 69 above. 72 See also Brougham v Dwyer (1913) 29 TLR 234 (HC); International Sales and Agencies Ltd v Marcus [1982] 3 All ER 551 (HC); Precision Dippings Ltd v Precision Dippings

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CO N C L U S I O N S

The principal arguments of this essay can be summarised in the following propositions: 1. Birks’s schema for determining which restitutionary claims are proprietary should be rejected. The line between ‘initial failure of basis’ and ‘subsequent failure’ in the transfer of value is not as clear-cut as it appears, nor does it produce a compelling dichotomy. 2. Restitutionary claims based solely on the transferor’s own error should be personal only. 3. It is probably too late to deny proprietary rights of some sort to the victim of misrepresentation, at least fraudulent misrepresentation. It may be, however, that these rights fail to survive the formal insolvency of a recipient if the claimant has not invoked them before that time. In that regard, much may turn on the provisions of the particular insolvency regime, individual or corporate. 4. Where a transaction proves legally ineffective owing to a lack of capacity on the part of one of the (corporate) parties, proprietary rights are likely to be asymmetric. The incapax party will have proprietary rights to recover money or other property transferred away, as would be the case with other unauthorised dispositions. A capax party to the same transaction, however, has personal rights only.

Marketing Ltd [1986] Ch 447 (CA); Belmont Finance Corporation v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 (CA); Aveling Barford Ltd v Perion Ltd [1989] BCLC 626 (HC); Guinness plc v Saunders [1990] 2 AC 663 (HL); Re Cleveland Trust plc [1991] BCLC 424 (HC).

19 The Resulting Trust THE RES ULTI NG TRUS T

EOIN O’DELL * EOI N O’ DELL

I I N T RO DUCT I O N : T H E R E ’ S N O S U C H T H I N G AS A RESULT ING T RUST TO REVERS E UNJUST E NRICHMENT, AND I T ’ S A G O O D T H I N G TO O !

T

HE BAS IC THEME of this essay is that the resulting trust arises by operation of law and may be displaced by intention—more particularly, that the resulting trust arises by operation of law in cases of gifts and of trusts which apparently fail, and may be displaced by the demonstration of the donor’s (actual or presumed) intention to benefit the recipient.1 There is no room in this approach for a restitutionary analysis predicated upon the unjust enrichment of the recipient at the expense of the donor. Nevertheless, one of the many ideas advanced by Peter Birks in his pioneering book, An Introduction to the Law of Restitution,2 was that resulting trusts are indeed restitutionary, called up to reverse unjust enrichments.3 He returned to this argument during his career4 and again in his last book, the groundbreaking Unjust Enrichment.5 Robert Chambers gave it even more detailed and sophisticated expression, first in his major book on Resulting Trusts,6 thereafter in subsequent * Fellow and Senior Lecturer in Law, Trinity College Dublin. I would like to thank Sir Jack Beatson, Professor Steve Hedley, Mr Richard Nolan, Professor Graham Virgo and Professor Sarah Worthington for their comments on earlier versions of this essay. 1 See, in particular, part II of this essay. 2 (Clarendon Press, Oxford, revised edn, 1989). 3 Ibid, 58–61. 4 P Birks, ‘Restitution and Resulting Trusts’ in S Goldstein (ed), Equity: Contemporary Legal Developments (Jerusalem, Hebrew University of Jerusalem, 1992) 335 (reprinted in P Birks and F Rose (eds), Restitution and Equity. Volume One. Resulting Trusts and Equitable Compensation (London, Mansfield/LLP, 2000) Appendix 1, 277); P Birks, ‘Trusts Raised to Reverse Unjust Enrichment: The Westdeutsche Case’ [1996] Restitution Law Review 3. 5 (Oxford, Oxford University Press, 1st edn 2003) 264–6; (Oxford, Oxford University Press, 2nd edn, 2005) 304–7. 6 (Oxford, Clarendon Press, 1997).

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articles7 including an important one in memoriam Peter Birks.8 Indeed, the essentials of the viewpoint have been taken up by Lord Millett in the Privy Council in Air Jamaica Ltd v Charlton.9 On the other hand, as strongly as Birks and Chambers have argued in favour of an analysis of the resulting trust as a restitutionary response to unjust enrichment, William Swadling10 and Charles Rickett and Ross Grantham11 have powerfully argued for the pre-existing orthodoxy. Furthermore, in Westdeutsche Landesbank Girozentrale v Islington LBC,12 Lord Browne-Wilkinson robustly asserted a similar line,13 whilst Lord Goff characterized Birks’s thesis in this respect as ‘avowedly experimental, written to test the temperature of the water’14 and felt ‘bound to respond that the temperature of the water must be regarded as decidedly cold’.15 Moreover, the Supreme Court of Canada recently decided two appeals16 turning on resulting trust principles by a straightforward application of the orthodoxy and without mention of the competing unjust enrichment analysis. It is an important debate, which is not yet over. Indeed, it could not have been more opportune: for too long, courts of chancery have muddled along with resulting trusts rules that embarrassed17 or frustrated them.18 7 R Chambers, ‘Constructive Trusts in Canada’ (1999) 37 Alberta Law Review 173; R Chambers, ‘Resulting Trusts in Canada’ (2000) 38 Alberta Law Review 378 (reprinted: (2002) 16 Trust Law International 104); R Chambers, ‘Resulting Trusts and Equitable Compensation’ (2001) 15 Trust Law International 2. 8 R Chambers, ‘Resulting Trusts’ in A Burrows and A Rodger (eds), Mapping the Law. Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006) 247. 9 [1999] 1 WLR 1399, 1412 (PC). See also nn 128–32 below; P Millett, ‘Tracing the Proceeds of Fraud’ (1991) 107 LQR 71, 80; P Millett, ‘Bribes and Secret Commissions’ [1993] Restitution Law Review 7, 13–14; P Millett, ‘Equity—the Road Ahead’ (1995) 9 Trust Law International 35, 39 (reprinted (1995–96) 6 King’s College Law Journal 1); P Millett, ‘Restitution and Constructive Trusts’ in W Cornish, R Nolan, J O’Sullivan and G Virgo (eds), Restitution. Past, Present and Future (Oxford, Hart Publishing, 1998) 199, 201–2 (reprinted (1998) 114 LQR 399); P Millett ‘Pension Schemes and the Law of Trusts: the Tail Wagging the Dog?’ (2000) 14 Trust Law International 66, 72–4. 10 W Swadling, ‘A New Role for Resulting Trusts?’ (1996) 16 Legal Studies 110; W Swadling, ‘A Hard Look at Hodgson v Marks’ in Birks and Rose, n 4 above, 61; W Swadling, ‘Explaining Resulting Trusts’ (2008) 124 LQR 72. 11 C Rickett and R Grantham, ‘Resulting Trusts—A Rather Limited Doctrine’ in Birks and Rose, n 4 above; C Rickett and R Grantham, ‘Resulting Trusts—The True Rationale of the Failing Trust Cases’ (2000) 116 LQR 15. 12 [1996] AC 669 (HL). 13 Ibid, 708; see n 74 below. 14 Ibid, 689. 15 Ibid. 16 Pecore v Pecore [2007] SCC 17 (SCC); Madsen Estate v Saylor [2007] SCC 18 (SCC). 17 In Bennet v Bennet, Jessel MR confessed himself ‘very much embarrassed by the authority’ ((1879) LR 10 Ch D 474, 476 (HC)) by which a presumed resulting trust of a gift by a mother to her child was not rebutted by a presumption of advancement; see also Re De Visme (1864) 2 De GJ&S 17 (CA in Chancery); and n 37 below. 18 See, eg Calverly v Green (1984) 155 CLR 242, 264–5 (HCA); Dullow v Dullow (1985) 3 NSWLR 531, 535 (NSWCA); Brown v Brown (1993) 31 NSWLR 582, 595 (NSWCA); Nelson

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This essay is therefore presented as a further contribution to the current debates concerning the basis of the resulting trust. It defends the view presented in the opening sentence that, if the great mass of encrusted learning and accumulated doctrine is stripped away and the resulting trust is stripped down to its essentials, a very simple doctrine emerges: that the resulting trust, as a classic default rule, arises by operation of law and may be displaced by intention. It arises in two basic situations: in the case of gifts and in the case of trusts which apparently fail.19 The gift and the apparent failure are the essential facts which constitute the trust, though it can be displaced if in either case it can be demonstrated that the donor actually intended a gift to the recipient. On this view, analysis of the donor’s intention is largely irrelevant to the constitution of the resulting trust, though a donor’s intention to make a gift will displace the trust—from this perspective, the donor’s intention is responsive to the resulting trust. In part II, the resulting trust will be stripped down to its essentials, to establish and defend a vision of a resulting trust which arises by operation of law in the case of gifts and of trusts which apparently fail but which may be displaced by the donor’s (actual or presumed) intention to benefit the recipient. Part III will consider the competing view of Birks and Chambers, and will seek to strip the resulting trust to reverse unjust enrichment out of the legal system, before part IV concludes that, as a consequence, there is no such thing as a resulting trust to reverse unjust enrichment, and it’s a good thing too!

II

S T R I P P I N G D OW N T H E RE S U LT I N G T RU S T

Resulting trusts arise by operation of law, and may be displaced by intention. As a matter of history, there seem to be two categories in which such trusts have arisen. They arise in respect of gifts, and in respect of trusts which seem to fail.20 v Nelson (1995) 184 CLR 538, 600–602 (HCA); all critical of the resulting trust, and often especially of its presumptions; cf Tinsley v Milligan [1994] 1 AC 340, 371 (HL). 19 Eg Killen v Rennie [2005] NSWCA 392 [69] (NSWCA); R Keane, Equity and the Law of Trusts in the Republic of Ireland (London, Butterworths, 1990) 156–7 [12.02]; H Delany, Equity and the Law of Trusts in Ireland (Dublin, Round Hall Thompson, 4th edn, 2007) 135; D Hayton and C Mitchell, Hayton and Marshall’s Commentary and Cases on the Law of Trusts and Equitable Remedies (London, Sweet and Maxwell, 12th edn, 2005) 293; E Simpson, ‘On the Nature of Resulting Trusts: The Vandervell Litigation Revisited’ in Birks and Rose, n 4 above, 5: ‘both established categories of resulting trusts arise by operation of law’ (emphasis in original). 20 Ibid.

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In the case of gifts, resulting trusts arise simply because they are gifts.21 The core of this basic truth is to be seen in the oft-quoted words of Eyre CB in the great case of Dyer v Dyer22: The clear result of all the cases, without a single exception, is that the trust of a legal estate . . . results to the man who advances the purchase money. This is a general proposition, supported by all the cases, and there is nothing to contradict it; and it goes on a strict analogy with the rule of the common law, that where a feoffment is made without consideration, the use results to the feoffor. It is the established doctrine of a Court of equity, that this resulting trust may be rebutted by circumstances in evidence.23

The key to this passage is simple: the resulting trust arises by operation of law simply because the donor transferred the property gratuitously. Because of equity’s historical suspicions of gifts, that was enough for it to require that the recipient justify the receipt, and a recipient who could not do so would hold it on resulting trust for the donor. The best way for the recipient to justify the receipt was to show that the donor did in fact intend 21 There were good historical reasons why a medieval use was presumed in the context of a gratuitous disposition of land (see, eg J Barton, ‘The Medieval Use’ (1965) 81 LQR 562, 571–2; J Baker, ‘The Use Upon a Use in Equity 1558–1625’ (1977) 93 LQR 33; A Simpson, A History of the Common Law of Contract (Oxford, Clarendon Press, 1975) 334–57; A Simpson, A History of the Land Law (Oxford, Clarendon Press, 1986) 177; D Ibbetson, A Historical Introduction to the Law of Obligations (Oxford, Oxford University Press, 1999) 267, 274, 281–4) and the trust inherited the presumption when it succeeded the use (Grey v Grey (1677) 2 Swans 594, 598 (HC in Chancery); Lloyd v Spillet (1740) 2 Atk 148, 150; (HC in Chancery); Dyer v Dyer (1788) 2 Cox Eq 92, 93 (Exchequer); Dullow v Dullow, n 18 above, 535). See Chambers, Resulting Trusts, n 6 above, 19–20; Chambers, ‘Resulting Trusts in Canada’, n 7 above, 385–6, 393–5; Chambers, ‘Resulting Trusts’, n 8 above, 251; J Glover, ‘Re-assessing the Uses of the Resulting Trust: Modern and Medieval Themes’ (1999) 25 Monash University Law Review 110, 111–13; Swadling, ‘A New Role’, n 10 above, 113–15; Swadling, ‘Explaining Resulting Trusts’, n 10 above, 85–9. Hence, it is still the case that, in modern law, equity ‘assumes bargains, not gifts’ (Goodfriend v Goodfriend (1972) 22 DLR (3d) 699, 703 (SCC); Pecore v Pecore, n 16 above, [24]; S Worthington, Equity (Oxford, Clarendon Press, 2003) 236, 279–80). 22 (1788) 2 Cox Eq 92 (Exchequer); see also The Venture [1908] P 218 (CA); Re Slattery [1917] 2 IR 278 (HC). Ryall v Ryall (1739) 1 Atk 59 (HC in Chancery) is susceptible of a similar analysis; see nn 90, 94, 113–14 below. 23 (1788) 2 Cox Eq 92, 93 (Exchequer). In Standing v Bowring (1885) 31 Ch D 292 (CA) the donor transferred assets out of his own name and into the joint names of himself and the recipient, a nephew of his first wife, thereby making a gift (J Hill, ‘The Role of the Donee’s Consent in the Law of Gift’ (2001) 117 LQR 127) of an interest in the property to the nephew and raising a resulting trust. Again, in Carlton v Goodman [2002] EWCA Civ 545, property in the joint names of an unmarried couple but paid for by the man was held on resulting trust for him (following Dyer; see [22](iii), [36] (CA)), and there were no circumstances in evidence to rebut it. On the other hand, in Aroso v Coutts [2002] 1 All ER (Comm) 241 (HC), Lawrence Collins J held that the presumption of resulting trust could be rebutted by evidence of contrary intention ([22] and [25]) which he found on the facts before him ([35]). Similarly, in Vajpeyi v Yusaf [2003] EWHC 2788, Judge Prescott QC followed Dyer ([64]–[65]) and held that the presumption of resulting trust had been rebutted ([71]–[78]) by proof that the advance was, on the facts, a loan ([82]–[90]).

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it to be a gift notwithstanding that it was not a transaction for value. In this respect, proof of the donor’s intention was the best of the circumstances in evidence to rebut the resulting trust which had arisen simply by virtue of the gratuitous nature of the transfer. This is the proper role of intention: it is responsive, in the sense that it is properly used in response to a trust which has arisen by operation of law.24 It is not constitutive, in the sense that it is not an element the presence or absence of which is necessary to constitute that trust. Hence, in the case of a gift, a resulting trust arises by operation of law, and it may be displaced by intention. As a consequence, in Cowcher v Cowcher,25 Bagnall J held26: A resulting trust arises where a person acquires a legal estate but has not provided the consideration or the whole of the consideration for its acquisition, unless a contrary intention is proved.

The mechanism by which the burden of showing the donor’s intention is cast upon the recipient is that old favourite of equity jurisprudence, a presumption.27 When a gift is made without consideration, equity presumes that the donor28 intended it to be held on resulting trust29 unless the recipient can rebut the presumption by any evidence that negatives that presumed intention, and in particular by proof of a contrary intention on the part of the donor.30 In such circumstances, as John

24 That is, it arises by operation of law in response to some fact other than the donor’s intention, in this case in response to the fact that the transaction is a gift. 25 [1972] 1 WLR 425 (HC). 26 Ibid, 431; cf Vandervell v IRC [1967] 2 AC 291, 306, 312 (HL); McEneaney v Shevlin [1912] 1 IR 32 (HC); [1912] 1 IR 278 (CA); Similarly, in Pettitt v Pettitt [1970] AC 777, 813–14, (HL), Lord Upjohn held that

in the absence of evidence to the contrary if the property be conveyed into the name of a stranger he will hold it as trustee for the person putting up the purchase money (followed in Carlton v Goodman, n 23 above, [36]); the gift—conveyance into the name of a stranger—is sufficient to raise the resulting trust, which can then be displaced by contrary evidence. 27 See generally Swadling, ‘Explaining Resulting Trusts’, n 10 above. In particular, it is an evidential presumption of the kind discussed in Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 [16] (Lord Nicholls: ‘descriptive of a shift in the evidential onus on a question of fact’); [94] (Lord Clyde: ‘simply a matter of evidence and proof’); [104]–[107] (Lord Hobhouse: the burden is ‘an evidential one’); [153] (Lord Scott: ‘an evidential rebuttable presumption’ that ‘shifts the onus’ of proof). 28 It is the donor’s intention that is being presumed, not the intentions of both parties (cf Tinsley v Milligan, n 18 above, 371; Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 708 (HL); Carlton v Goodman, n 23 above, [21], [22](ix); though in that case, Ward LJ ([33]–[35], [42]) seems to have been alive to this point). For trusts responding to the parties’ common intentions, see nn 42–5 below. 29 Gissing v Gissing [1971] AC 886, 902 (HL); Westdeutsche, ibid (see n 74 below). 30 Nicholson v Mulligan (1869) IR 3 Eq 308, 322–3 (Rolls Ct); Standing v Bowring, n 23 above, 287; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353, 363–4 (HCA); Vandervell v IRC, n 26 above, 312; Re Vandervell’s Trusts (No 2) [1974] 1 Ch 269, 288 (HC); Lynch v Burke [1995] 2 IR 159, 166–7 (HC).

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Glover has stated, resulting trusts ‘are implied in the absence of a contrary intention’.31 The presumption probably reflects the donor’s most likely intention,32 but it does not alter the fact that the two essential characteristics of this trust are that it arises by operation of law because the transfer is made without consideration, and that it can be displaced by demonstrating the donor’s intention to make a gift to the recipient.33 Moreover, as Lord Nicholls put it in the context of discussing a different equitable presumption: [The] use, in the course of the trial, of the forensic tool of a shift in the evidential burden of proof should not be permitted to obscure the overall position.34

In this context, we must be careful not to focus our analysis on the forensic tool of the presumption to the detriment of the underlying essential fact of the gift. However, the interposition of the presumption does have at least four important consequences. First, it is a strong means of casting upon the recipient the onus of justifying the receipt35—and if the recipient cannot, the property results to the donor. Secondly, in casting upon the recipient the onus of justifying the receipt by presuming an intention on the part of the donor, and in then allowing that presumption to be rebutted by anything36 that negatives that intention, the set of evidence that can rebut the presumption is broader than merely the donor’s intention to make a gift to the recipient—though that is still the most effective way to rebut it. In particular, it can be rebutted by a contrary presumption, the presumption of advancement,

31 Glover, n 21 above, 120 (emphasis in original). An interesting example of the search for a contrary intention on the facts is provided by HCK China Investments Ltd v Solar Honest Ltd [1999] FCA 1156 (FCA). 32 Pettitt v Pettitt, n 26 above, 283; Rickett and Grantham, ‘A Rather Limited Doctrine’, n 11 above, 44–5. 33 Since these are the essential characteristics of the trust, it follows, of course, that the ‘resulting trust of an apparent gift will arise even though the defendant is wholly innocent’ (Chambers, ‘Resulting Trusts’, n 8 above, 253). 34 RBS v Etridge, above n 27, [16]; cf [107] (Lord Hobhouse). 35 Vandervell v IRC, n 26 above, 315 (evidential longstop); Muschinski v Dodds (1985) 160 CLR 583, 612 (HCA); Pecore v Pecore, n 16 above, [24]–[25]; G Virgo and J O’Sullivan, ‘Resulting Trusts and Illegality’ in Birks and Rose, n 4 above, 97. 36 Vandervell v IRC, ibid, 312: ‘All the relevant facts and circumstances can be considered . . . with a view to rebutting this presumption’ (per Lord Upjohn); Pettitt v Pettitt, n 26 above, 814: it can be ‘readily rebutted by comparatively slight evidence’ (per Lord Upjohn); Westdeutsche, n 28 above, 708; Potter v Potter [2004] UKPC 41 (PC); Swadling, ‘A New Role’, n 10 above, 115–17. Eg in Killen v Rennie, n 19 above, the presumption of a resulting trust was rebutted on the grounds that it was ‘entirely incompatible’ ([89] (per Santow JA)) with the plaintiff’s actions on the facts. Cf Shephard v Cartwright [1955] AC 431, 445 (HL); Charles Marshall v Grimsley, above n 30, 365.

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which presumes an intention on the part of the donor to make a gift in certain situations.37 Thirdly, the presumption (that the donor did not intend a gift) must be handled with care: the key is that the intention is presumed from the underlying essential fact to which the inquiry ought to be directed and which actually gives rise to the trust. On this view, the donor’s presumed intention is not really constitutive of the resulting trust; the trust arises because of the underlying fact of the gift from which the donor’s intention is presumed. As a consequence, the proper role of intention in this context is in being responsive to the resulting trust and not constitutive of it. Moreover, the interposition of a presumption as to the donor’s intention between the essential fact of the gift and the imposition of the resulting trust seems to amount to an unnecessary extra layer of analysis. These various themes about the presumption are reflected in the fourth consequence of the interposition of the presumption between the underlying gift and the trust thereby called up. This is the service into which the presumption has been pressed in mediating the contested facts of difficult claims on the breakdown of marriages and other intimate relationships.38 On orthodox principles, if one partner in such a relationship makes a gift of property to the other, then this gift will trigger the presumption giving rise to a resulting trust39; and if—as is more likely—the partner makes a contribution to the purchase price of property put into the other’s name, then this gift will trigger the presumption giving rise to a resulting trust proportionate to the contribution.40 On similarly orthodox principles, the 37 Chambers, Resulting Trusts, n 6 above, 27–32. English law presumes such an advancement in the case of gifts from husbands to wives (Kingdon v Bridges (1688) 2 Vern 67 (Ct of Chancery))—but not vice versa (though this must be open to question in other common law jurisdictions with equality guarantees of constitutional status), and in the case of gifts from fathers (or those similarly in loco parentis: Powys v Mansfield (1835) 2 Myl&Cr 359 (HC in Chancery); Bennet v Bennet, above n 17, 477) to children (Grey v Grey (1677) Rep Temp Finch 338 (HC in Chancery); Re Wall’s Estate [1922] 1 IR 59 (HC)) but not from mothers to children (see n 17 above; McCabe v Ulster Bank Ltd [1939] IR 1 (HC); Sekhon v Allisa [1989] 2 FLR 94 (HC); Ali v Khan [2002] EWCA Civ 974, [30] (CA); see also Kuppusami v Kuppusami [2002] EWHC 2758 (Ch) (HC)). However, this limitation has been questioned in England (Garrett v Wilkinson (1848) 2 DeG&Sm 344 (HC in Chancery); Sayre v Hughes (1868) LR 5 Eq 376 (Equity)) and Ireland (Re Grimes [1937] IR 470 (HC); Keane, n 19 above, 158 [12.03]; Delany, n 19 above, 171–4), and has been departed from in Australia (Wirth v Wirth (1956) 98 CLR 228 (HCA); Brown v Brown, n 18 above; Nelson v Nelson, n 18 above; Damberg v Damberg [2001] NSWCA 87) (NSWCA) and Canada (Pecore v Pecore, n 16 above, [31]–[33]; Madsen Estate v Saylor, n 16 above). Of course, as a presumption, even where the presumption of advancement is made out, it can be rebutted, usually by evidence that no gift was in fact intended (eg RF v MF [1995] 2 ILRM 572, 576–7 (SC); Buffrey v Buffrey [2006] NSWSC 1349 (NSWSC)). 38 See generally J Mee, The Property Rights of Cohabitees (Oxford, Hart Publishing, 1999), though ‘the use of resulting trust reasoning is now relatively uncommon’ (Law Commission Discussion Paper on Sharing Homes (Law Com No 278, 2002) 25) in the context of relationship breakdown. 39 Mee, ibid, ch 2. 40 Ibid; Delany, n 19 above, 161–2. Indeed, the Irish courts (eg W v W [1981] ILRM 202 (HC); EN v RN [1992] 2 IR 116 (SC); BL v ML [1992] 2 IR 77 (SC)) have taken increasingly

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presumption in such cases can be rebutted, and the trust displaced, by proof of the donor’s intention to benefit the recipient (which is probably the donor’s most likely intention in the context of the intimate relationship). However, the presumption can be rebutted by factors other than the donor’s intention if they negative the donor’s presumed intention41; and, in the relationship breakdown cases, the courts have also allowed this resulting trust to be displaced by a further trust42 constructed upon the parties’ common intentions about the shares in which interests in the property are to be held.43 This further (common intention) trust is not a resulting trust,44 for the very fundamental reason that the role of intention is radically different in the two trusts. The resulting trust arises simply because of the underlying essential fact of the donor’s gift, with the role of the donor’s intention being responsive to that fact, and not in fact constitutive of the resulting trust. On the other hand, the common intention trust arises (as its name suggests) because of the parties’ common intention, so that the role of intention here is in fact constitutive of the trust. However, this intrinsic difference between the two trusts can be obscured if the presumption of the donor’s intention is taken too seriously in the resulting trust context: if analysis is directed to the presumed intention of the donor (rather than to the underlying fact of the gift), then it becomes all too easy to elide the donor’s presumed intention with the parties’ common intention45 and, as a consequence, to mischaracterise the common intention trust as a resulting benign views of what counts as a contribution to the purchase price for this purpose; see Mee, n 38 above, ch 3; see also J Mee, ‘Trusts of the Family Home—Boiling Oil From the Ivory Tower’ (1992) 14 Dublin University Law Journal (ns) 19; J Mee, ‘Trusts of the Family Home—The Irish Experience’ [1993] The Conveyancer and Property Lawyer 359. 41 Of course, where the gift in question is from a husband to his wife, the presumption of advancement (see n 37 above) will apply to rebut the presumption that the husband did not intend a gift to his wife and thereby to displace the resulting trust (Re Eykyn’s Trust (1877) 6 ChD 115, 118 (HC); Irwin v O’Connell [1936] IR 44 (SC); RF v MF, n 37 above (presumption of advancement rebutted; unrebutted resulting trust effective)) though—unless and until constitutional equality principles supervene—there is no presumption of advancement where the gift is from the wife to the husband (Containercare (Ireland) Ltd v Wycherley [1982] IR 143, 152 (HC)). 42 Mee, n 38 above ch 5; Lloyd’s Bank v Rosset [1991] 1 AC 107 (HL); Oxley v Hiscock [2004] EWCA Civ 546 (CA); Stack v Dowden [2005] EWCA Civ 857 (CA); cf N Glover and P Todd, ‘The Myth of Common Intention’ (1996) 16 Legal Studies 325. 43 More generally, any resulting trust arising simply from the fact of the gift would be rebutted by any other doctrine (legal or equitable, judge-made or statutory; see generally Mee, n 38 above; The Law Commission, Cohabitation: The Financial Consequences of Relationship Breakdown, Consultation Paper No 179 (2006)) which assigned (or reassigned) the parties’ interests in the property. 44 Chambers, Resulting Trusts, n 6 above, 36–8, 98, 228–9; Mee, n 38 above 39–43, 155; Rickett and Grantham, ‘A Rather Limited Doctrine’, n 11 above, 40. Instead, it is more likely to be a constructive trust (Lloyd’s Bank v Rosset, n 42 above, 132–3 (HL); Thompson v Leigh [2006] NSWSC 540 (NSWSC)) or—perhaps—a Quistclose trust (Barclays Bank v Quistclose Investments [1970] AC 567 (HL); Twinsectra v Yardley [2002] 2 AC 164 (HL)). 45 Infamously, Lord Browne-Wilkinson did this in Westdeutsche, n 28 above, 708 (see n 74 below).

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trust. On the other hand, on a clear-sighted view of the essentially different characteristics of both trusts, it is clear that the role of intention in the resulting trust context is as responsive to that trust (and not constitutive of it), whereas the role of intention in the common intention trust is as constitutive of that trust. Hence, in the resulting trust context, proof of intention displaces the trust whereas, in the common intention trust context, proof of intention establishes the trust. They are, therefore, very different and entirely separate; and this separation is most easily grasped and maintained if the presumption in the resulting trust context is not taken too seriously or pressed too far. It may be that Rickett and Grantham also press the presumption too far (though in a different direction). They see the fundamental inquiry in resulting trust cases as being whether the transfer is intended by the donor to be beneficial to the recipient, and the presumption as the means by which the donor’s intention is established.46 Consequently, Rickett has argued that resulting trusts ought to be reclassified as presumed trusts.47 This unnecessary re-baptism is born out of a misguided focus on the presumption rather than on the underlying facts. The presumption—and, if it is unrebutted, the trust—arise simply because the transfer was a gift. The donor’s intention, actual or presumed, is not constitutive of the resulting trust; that trust arises out of the underlying essential fact of the gift. However, once a trust has thereby been triggered, an intention on the part of the donor to make a gift to the recipient is sufficient to displace it. The resulting trust applies to gifts of both realty48 and personalty49; however, gifts of realty are not uncommon and the trust is 46 See n 11 above; see also C Rickett and R Grantham, Enrichment and Restitution in New Zealand (Oxford, Hart Publishing, 2000) 300–7; C Rickett and R Grantham, ‘Towards a More Constructive Classification of Trusts’ [1999] Lloyd’s Maritime and Commercial Law Quarterly 111, 115–17. 47 C Rickett, ‘The Classification of Trusts’ (1999) 18 New Zealand Universities Law Review 305, 313–19. 48 However, in England and Wales, s 60(3) of the Law of Property Act 1925 provides that in

a voluntary conveyance, a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for use or benefit of the grantee In Ireland, by means of s 123(3) of the Registration of Title Act 1964, a similar rule applies to registered—but not unregistered—land. Chambers, Resulting Trusts, n 6 above, 16–19, 38 argues that s 60(3) probably precludes the resulting trust in the case of gratuitous transfers of land (cf Glover, n 21 above, 112–13, 120–2). Though the question was left open in Hodgson v Marks [1971] 1 Ch 892 (CA), the ambiguous decision of the Court of Appeal in Lohia v Lohia [2001] WTLR 101 has nevertheless been taken to have established ‘that the presumption of a resulting trust on a voluntary conveyance of land has been abolished by s60(3)’ (Ali v Khan, n 37 above, [24] (per Morritt VC)). 49 Chambers, Resulting Trusts, n 6 above, 12–13, 16; Glover, n 21 above 111–12; The Venture, n 22 above (ship); Re Slattery, n 22 above (interest in life assurance policy); Niles v Lake [1947] 2 DLR 248, 255 (SCC) (choses in action); Shephard v Cartwright, n 36 above, (same); Charles Marshall v Grimsley, above n 30 (shares; but resulting trust rebutted); Bateman Television v Bateman [1971] NZLR 453 (NZCA) (car); Fitzpatrick v Criminal Assets Bureau

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displaced rather easily in such cases, whilst gifts of personalty are especially common and the trust is displaced very easily indeed in such cases.50 Thus, for example, in the context of a joint deposit account, where the donor has deposited money in an account in the joint names of the donor and another, equity will raise a resulting trust in favour of the donor depositor, unless the presumption of advancement applies, or unless evidence can be adduced that the donor intended to make a gift; and it is now51 relatively easy to spell out from the circumstances of the creation or operation of the account that the donor did intend such a gift.52 The resulting trust over gifts is so easily rebutted in so many situations, in fact, that it may be questioned whether such a trust is appropriate to modern conditions.53 But so long as there is no legislative or judicial act of law reform abrogating it, it remains the law that resulting trusts arise by operation of law in the case of gifts, and are displaced (primarily) by the donor’s contrary intention.

[2000] 1 IR 243 (SC) (car). There is unnecessary uncertainty as to whether an option can be subject to a resulting trust: Vandervell v IRC, n 26 above, 315; Re Vandervell’s Trusts (No 2), n 30 above, 291–3; Simpson, n 19 above, 11 at n 41. 50 ‘the presumption must, beyond all question, bear very different weight in different cases’: Fowkes v Pascoe (1875) LR 10 Ch 343, 352 (CA) (per Mellish LJ); ‘this is only a presumption and is easily rebutted’: Vandervell v IRC, ibid, 312 (per Lord Upjohn); Pettitt v Pettitt, n 26 above, 814 (per Lord Upjohn), followed in Carlton v Goodman, n 23 above, [36]. This is unsurprising: although ‘equity will not aid a volunteer, it will not strive officiously to defeat a gift’ (T Choithram International SA v Pagarani [2001] 1 WLR 1, 11 (PC) (per Lord Browne-Wilkinson)). 51 It was not always thus: see Owens v Greene [1932] IR 225 (SC) (L Sheridan, ‘Reflections on Irish Deposit Receipts’ (1950–2) 9 Northern Ireland Legal Quarterly 101; J Montrose, ‘Joint Deposit Receipts’ (1950–2) 9 Northern Ireland Legal Quarterly 148; V Delany, ‘Joint Deposit Accounts: Some Misconceptions’ (1957) 23 Irish Jurist 31), recently followed in the High Court in Lynch v Burke [1991] IR 1 (J Brady, ‘Succession—The Adequacy of Joint Deposit Accounts as Will Substitutes’ (1990) 12 Dublin University Law Journal 155) and AIB Finance v Sligo County Council [1995] 1 ILRM 81. 52 Russell v Scott (1936) 55 CLR 440 (HCA); Lynch v Burke [1995] 2 IR 159 (SC) (overruling Owens v Greene; see J Breslin, ‘Survivorship Rights and Joint Deposit Accounts: Lynch v AIB Bank plc’ (1996) Commercial Law Practitioner 12; D Capper, ‘Survivorship Rights in Joint Deposit Accounts’ (1996) 47 Northern Ireland Legal Quarterly 281; S O’Doherty, ‘Lynch v Burke—The Supreme Court Heralds the Validation of Post-Mortem Dispositions’ (1996) 14 Irish Law Times (ns) 167; U Woods, ‘Joint Deposit Accounts and The Conditional Gift Theory’ (2002) 37 Irish Jurist (ns) 281); Aroso v Coutts, n 23 above; Pecore v Pecore, n 16 above; Madsen Estate v Saylor, n 16 above. 53 See n 18 above. The majority view is, however, that such presumptions are still useful and important (Pettitt v Pettitt, n 26 above, 813–14, followed in Carlton v Goodman, n 23 above, [36]) and ‘too well entrenched as “land-marks” in the law of property . . . to be simply discarded by judicial decision’ (Calverly v Green, above n 18, 265 (per Deane J)); see also Pecore v Pecore, n 16 above, [23] (Rothstein J). Hence, C Rickett and R Grantham, ‘Resulting Trusts—The True Rationale of the Failing Trust Cases’ (2000) 116 LQR 15, 17, argue that the presumption of resulting trust

sensible when it was formulated in the 16th century, remains eminently sensible today. . . . It is a judicious approach to determining the intention of the transferor or settler.

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B Resulting Trusts and Trusts Which Apparently Fail In the case of trusts which apparently fail, resulting trusts arise by operation of law simply because the trust has failed. In Morice v Bishop of Durham,54 where an attempted testamentary bequest to the Bishop of Durham on trust for benevolent purposes failed for uncertainty, Lord Eldon LC held55: The consequence of Law is, that the Bishop takes the property upon trust to dispose of it, as the Law will dispose of it: not for his own benefit, . . .

As a failed testamentary trust, the law disposed of the residue to the testator’s next of kin, for whom the Bishop held the bequest on trust, a trust which arose by operation of and as a ‘consequence of Law’. Again, if this apparently failed trust had instead been intended absolutely for the recipient, the resulting trust would have been displaced56: . . . if the testator meant to create a trust, and not to make an absolute gift, but the trust is ineffectually created, is not expressed at all, or fails, the next of kin take. On the other hand, if the party is to take himself, it must be upon this ground, according to the authorities; that the testator did not mean to create a trust; but intended a gift to that person for his own use and benefit; . . .

The key to this passage is simple: the resulting trust arises by operation of law simply because the attempted trust appears to have failed, unless the recipient could show that the donor did in fact intend him to have it absolutely.57 This is the proper role of intention: it is responsive, in the sense that it is properly used in response to a trust which has arisen by operation of law.58 It is not constitutive, in the sense that it is not an element the presence or absence of which determines the very constitution of that trust. Hence, where a trust has apparently failed, a resulting trust arises by operation of law, and it may be displaced by intention.

C

The Common Structure Underlying Resulting Trusts

Dyer and Morice are merely time-honoured examples of the two categories of resulting trusts which arise in respect of gifts and of trusts which seem to fail. The gift and the apparent failure of the trust are the essential facts 54 (1804) 9 Ves Jun 399 (HC in Chancery) affirmed (1805) 10 Ves Jun 522 (HC in Chancery). See also Re Lane’s Trusts (1863) 14 Ir Ch Rep 523 (Rolls Ct). 55 (1805) 10 Ves Jun 522, 543 (HC in Chancery). 56 (1805) 10 Ves Jun 535 (HC in Chancery); cf Swadling, ‘A New Role’, n 10 above, 113 (‘an automatic resulting trust cannot be rebutted by evidence of an intention to give’); Delany, n 19 above, 150. 57 Vandervell v IRC, n 26 above, 313, 329. 58 That is, it arises by operation of law in response to some fact other than the donor’s intention, in this case in response to the fact that a trust has apparently failed.

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which trigger the resulting trust. As a consequence, there is an underlying common structure between the two categories, in the combination of the essential fact which generates the trust and the role of the donor’s intention in displacing it. However, in the first category, by means of the presumption, equity interposes a further step between the essential fact which generates the trust and the intention which displaces it. In the infamous Vandervell litigation,59 Megarry J considered that this interposition gave rise to a difference between the two categories not just in degree but also in kind. Mr Vandervell transferred shares to the Royal College of Surgeons, which in turn granted an option over the shares to his trust company, Vandervell Trustees. However, he did not clearly specify the trust on which the trust company held the option, and, in Vandervell v IRC,60 the House of Lords61 held that the trust failed for lack of ascertainable beneficiaries, so that there was a resulting trust for Mr Vandervell, with calamitous surtax consequences for him. The Court of Appeal had placed the case in the first category, holding that Mr Vandervell’s gift raised a presumed resulting trust which was not rebutted on the evidence, whereas the majority in the House placed the case in the second category of trusts which apparently fail. Subsequently, using money from a trust in favour of Mr Vandervell’s children, the trust company sought to exercise the option and hold the shares on trust for the children. The revenue again sought to visit Mr Vandervell with a surtax liability, arguing that this trust also failed. However, the Court of Appeal in Re Vandervell’s Trusts (No 2)62 held that, this time, a trust had been validly constituted.63 There being no gap in the beneficial ownership, there could be no resulting trust. For Mr Vandervell, to lose one such case was a misfortune; to have lost both would have looked like carelessness. Nevertheless, Megarry J at first instance had held that this attempt to create a trust had also failed and, in See generally Simpson, n 19 above. Vandervell v IRC, n 26 above, affirmed [1966] Ch 261 (CA); see G Jones, ‘Section 53(1)(c) and (2) of the Law of Property Act, 1925—Recent Developments’ (1966) 24 CLJ 19; S Spencer, ‘Of Concurring Beneficiaries and Transferring Trustees’ (1967) 31 The Conveyancer and Property Lawyer (ns) 175; N Strauss, ‘Imperfect Gifts and the Law of Property Act 1925, s.53(1)(c)’ (1967) 30 MLR 461; R Nolan, ‘Vandervell v IRC: A Case of Overreaching’ [2002] CLJ 169. 61 By a majority of three (Lord Upjohn, Lord Pearce concurring, and Lord Wilberforce) to two (Lord Reid and Lord Donovan dissenting). 62 n 30 above; P Clarke, ‘Mr Vandervell Again’ (1974) 38 The Conveyancer and Property Lawyer (ns) 405; J Harris, ‘The Case of the Slippery Equity’ (1975) 38 MLR 557; D Klinck, ‘Style, Meaning and Knowing: Megarry J and Denning MR in In re Vandervell’s Trusts (No 2)’ (1987) 37 University of Toronto Law Journal 358. Since the trust was valid, a claim by Mr Vandervell’s estate to recover the shares from the trust company failed. This was the main issue in the case, but since the validity of the trust also determined the surtax issue, the revenue had stayed its claim until this action had been decided, and its application to be joined in this action failed: see Re Vandervell’s Trusts (No 1) [1971] AC 912 (HL). 63 At 319–20 (Denning MR), 325 (Lawton LJ), 323 (Stephenson LJ, grudgingly to like effect); reversing 299–300 (Megarry J). 59 60

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the course of a consideration of the nature of the resulting trust which thereby arose, held that the two categories operate in different ways64: . . . in the first category, subject to any provisions in the instrument, the matter is one of intention, with the rebuttable presumption of a resulting trust applying if the intention is not manifest. For the second category, there is no mention of any expression of intention in any instrument, or of any presumption of resulting trust: the resulting trust takes effect by operation of law, and so appears to be automatic.

On this view, the resulting trust in the case of gifts arises by virtue of the presumption of intention, whilst the resulting trust in the case of trusts which apparently fail arise automatically—this automatic resulting trust does not depend on any intentions or presumptions but is the automatic consequence of A’s failure to dispose of what is vested in him.65

Megarry J’s analysis has been described as a ‘classic judgment’66 which has been said to be at the heart of the modern law on resulting trusts.67 Nevertheless, his Lordship’s distinction between presumed and automatic resulting trusts, and in particular his understanding of the automatic resulting trust, has divided commentators. Those who take the presumption seriously, whether for unjust enrichment reasons or otherwise, argue that the resulting trust which arises in the case of trusts which apparently fail is not ‘automatic’ in Megarry J’s sense at all, but is in fact also based upon a presumption of intention. Birks always presented both species of resulting trust as presumed,68 whilst Chambers demonstrates that there is a long line of authority basing the resulting trust in the case of an apparent failure of a trust on the intention of the donor,69 allowing him to argue as a consequence that the intention to benefit the third party shows that the [donor] did not intend to benefit the trustee, which is the fact giving rise to the resulting trust by operation of law.70

Rickett and Grantham argue that an Ibid, 289, cf 294–5. Ibid, 294. Swadling, ‘A New Role’, n 10 above, 113. Corin v Patton (1990) 169 CLR 540, 578 (HCA). Birks, Introduction, n 2 above, 60–3; Birks, ‘Trusts Raised’, n 4 above, 11; Birks, Unjust Enrichment 1st edn, n 5 above, 266; Birks, Unjust Enrichment 2nd edn, n 5 above, 306. 69 Chambers, Resulting Trusts, n 6 above, 47–8, discussing Cook v Hutchinson (1836) 1 Keen 42 (Rolls Ct); Croome v Croome (1888) 59 LT 582 (HL); Re Foord [1922] 2 Ch 519 (HC); see also Chambers, ‘Resulting Trusts in Canada’, n 7 above, 388–9. 70 Chambers, Resulting Trusts, n 6 above, 50; see also 44; followed in this by Worthington, n 21 above, 67, 280. On this view, in Vandervell, the resulting trust arose from Mr Vandervell’s clear lack of intention to benefit the trust company, a lack demonstrated by the fact that he had granted the option expressly in trust: Chambers, ‘Resulting Trusts in Canada’, n 7 above, 390. 64 65 66 67 68

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incomplete disposal is merely the most obvious case for a presumption of non-beneficial intent. Conceptually it is of exactly the same type as the apparent gift cases. Indeed, rather than being the category most likely to be excluded from the operation of the presumption, it turns out to be the category most likely to be included! It is the strongest case for the operation of the presumption.71

Even Lord Browne-Wilkinson got in on this act in Westdeutsche, arguing that all resulting trusts give effect to the donor’s presumed intention and confessing himself as a consequence unconvinced by Megarry J’s category of automatic resulting trusts.72 Although these various positions take the presumption seriously for different reasons, they all demonstrate that it can easily accommodate cases of apparently failing trusts. Moreover, even if the presumption is played down in favour of a concentration upon the underlying essential facts, both species of resulting trusts can be said to arise in the same manner, by operation of law as a consequence of the establishment of one or other of the relevant essential facts: [It] is very much an operation of law, in the absence of evidence to the contrary. . . . In fact, once it is accepted that the resulting trust in respect of the . . . [presumed resulting trust] arises by operation of law in this way, it is difficult to see any real distinction, in terms of legal operation, between Megarry J’s two alleged categories.73

Since resulting trusts in both categories operate in a similar pattern (they each respond to an essential underlying fact—either of a gift or of an apparent failure of a trust—and may each be displaced by intention), any difference between the two categories can only be a matter of degree and not one of kind. Indeed, even if the presumption continues to be interposed between the essential underlying fact and the displacement of the trust in one category but not in the other, this does not change the underlying commonality of structure or pattern. Consequently, the basic point is that resulting trusts arise by operation of law in the case of gifts and of trusts which apparently fail, but they may in either case be displaced by the donor’s intention to make a gift to the 71 Rickett and Grantham, ‘A Rather Limited Doctrine’, n 11 above, 47. Keane CJ, extrajudicially, makes a similar point about automatic resulting trusts:

strictly speaking, [they] do not depend on any presumption as to the owner’s intentions but are the automatic consequence of the failure to dispose of the property. In a looser sense, however, they can be said to arise because the only intention which the law can reasonably attribute to the owner where he has for some reason failed effectively to dispose of his property is that it should revest in him or his successors (Keane, n 19 above, 157 [12.02]). 72 Westdeutsche, n 28 above, 708. 73 Simpson, n 19 above, 14. Indeed, it may be that, as Simpson comments (ibid, 20) that the rejection of the distinction between presumed and automatic resulting trusts strengthens the unjust enrichment hand (as to which, see section III below); but, even if it does, like a community card in hold’em poker, it similarly strengthens many of the competing hands as well.

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recipient. Much of this analysis is to be seen in the speech of Lord Browne-Wilkinson in Westdeutsche, when his Lordship said74: Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer . . . (B) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest: . . . A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention.

This statement of resulting trust orthodoxy clearly identifies the two categories of resulting trusts and the essential facts which give rise to them. Unfortunately, it adds the common, but analytically unnecessary, step that they reflect donors’ presumed intentions. It also confines the resulting trust to the two categories. As a consequence, Rickett and Grantham argue that it is a rather limited doctrine,75 a creature of the categories and confined to them. On the other hand, an essential move in the Birks and Chambers argument that the resulting trust responds to unjust enrichment is to generalize the resulting trust beyond the two categories.76 However, rejection of the restitutionary reading does not necessarily entail rejection of a generalization of the categories by analogy with the existing two categories. It is nevertheless difficult to see how this might occur. For example, Shanley J in Fitzpatrick v Criminal Assets Bureau77 declined to extend the presumption of advancement into the commercial sphere; and the unprincipled extension of the resulting trust in cases of relationship breakdown in Ireland78 clearly illustrates the dangers inherent in indefensible extensions of the categories of the resulting trust. Indeed, although there is an underlying common 74 Westdeutsche, n 28 above, 708 (excising a reference to presumed intentions of both parties criticised in text with and in nn 42–45 above, and a reference to Quistclose (see Barclays Bank v Quistclose Investments, n 44 above; cited with approval in Carlton v Goodman, n 23 above, [37]. The leading statement at Irish law is to the same effect: see Dublin Corporation v Building and Allied Trades Union (High Court, unreported, 6 March 1996), 105–6, without reference to this point [1996] 1 IR 468 reversed; E O’Dell, ‘Bricks and Stones and the Structure of the Law of Restitution’ (1998) 20 Dublin University Law Journal (ns) 101, 170–2; Delany, n 19 above, 68–9, 135–7. 75 Rickett and Grantham, n 46 above, 40. 76 Birks, ‘Trusts Raised’, n 4 above, 15–19; Chambers, Resulting Trusts, n 6 above, 104–5; Birks, Unjust Enrichment 1st edn, n 5 above, 264–6; Birks, Unjust Enrichment 2nd edn, n 5 above, 304–7; Chambers, ‘Resulting Trusts’, n 8 above, 249–50, 253. 77 [2000] 1 IR 243 (SC). 78 See n 40 above.

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structure between the two categories in the combination of the essential fact which generates the trust and the role of the donor’s intention in displacing it, this commonality does not of itself seem to prescribe a basis upon which resulting trusts might arise outside the two categories which have been bequeathed by history. In the end, therefore, Lord Browne-Wilkinson’s definition of the resulting trust in Westdeutsche entirely reflects its history, and provides a complete answer to the important but misguided attempt to provide a restitutionary vision of the resulting trust discussed in the next section of this essay.

III

STRIPPING OUT T HE RESULT ING T RUST TO REVERS E UNJUST ENRICHMENT

The resulting trust arises from one of two essential facts: a gift or an apparent failure of a trust. From these, orthodoxy has it that equity presumes that the donor intended that the recipient would hold the benefit on resulting trust—what Glover describes as the trust-creation view of the presumption.79 However, it has been suggested that what equity actually presumes is that the donor did not intend to benefit the recipient80—what Glover describes as the negative intention view.81 Samuels JA has suggested that the distinction between these two views is unimportant.82 On the view taken here, his Honour is quite right to sit on this particular fence; how the presumption of the donor’s intention is described matters not at all if the proper focus is not upon it but upon the underlying essential fact which generates the presumption of intention and the resulting trust. Nevertheless, history has grafted the presumption as to intention onto the underlying facts, and analysis has shifted accordingly. In this respect, the trust-creation view is consistent with history, but Birks argued that ‘in modern life a technical presumption of an intent to create a resulting trust is plainly nonsense’,83 and Glover argues that the negative intention view now ‘provides by far the better explanation’84 of the intention presumed. To the extent that it does, it provides Chambers with his basic jumping-off point.85 He distinguishes two species of the negative intention view, identifying Glover, n 21 above, 114. Calverly v Green, above n 18, 246, 251–2. Glover, n 21 above, 114. Allen v Snyder [1977] 2 NSWLR 685, 698 (NSWCA). Birks, ‘Trusts Raised’, n 4 above, 18; more sympathetic of the history are: Swadling (1992); Rickett and Grantham, ‘A Rather Limited Doctrine’, n 11 above, 58; Swadling, ‘Explaining Resulting Trusts’, n 10 above. 84 Glover, n 21 above, 116; see generally 114–20. 85 See especially Chambers, Resulting Trusts, n 6 above, 19–21; Chambers, ‘Resulting Trusts’, n 8 above, 252–3. 79 80 81 82 83

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a difference between a presumption that the [donor] did not intend to benefit the recipient and a presumption that the [donor] intended not to benefit the recipient.86

In his view, whilst either is preferable to the trust creation view, only the former can properly explain the resulting trust87: ‘all resulting trusts come into being because the provider did not intend to benefit the recipient’.88 On this view, therefore, in the context of a gift or of a trust which apparently fails, equity presumes such an absence of intention, and the recipient therefore holds the benefit on resulting trust for the donor. Obviously, the presumption that the donor did not intend to benefit the recipient can explain the great majority of the cases in which the orthodox presumption is deployed because the provider’s intention to keep any portion of the beneficial interest necessarily means that he or she does not intend to pass that interest to the recipient.89

Nevertheless, there are more difficult cases in which the donor could not have formed the relevant intent, presumed by orthodoxy, to create a trust for himself.90 In such cases, Chambers argues that the orthodox presumption cannot operate, but that his presumption of ‘a resulting trust based on the lack of intention to benefit the recipient can explain all these cases satisfactorily’.91 However, this is to misrepresent the role of the presumption. As an evidential longstop,92 the relevant intent is presumed simply from the underlying essential fact such as a gift by the donor. It is about presuming—rather than finding the reality of—the donor’s intent in the circumstances, and doing so not because the donor’s intent is in issue but because presuming that intent is a useful tactical means of casting upon the recipient the burden of justifying the receipt. Of course, if the presumption has been properly triggered, then an examination of the donor’s actual intention might follow in an attempt to rebut it; and in cases where the donor could not have formed any intent, this will preclude the demonstration of the intent necessary to rebut the trust. Hence, where the Chambers, Resulting Trusts, n 6 above, 21 (emphasis in original). Ibid. Ibid, 2; cf Worthington, n 21 above, 279–81. Hence, it is a theme to which Chambers often returns (ibid, 3, 21, 26, 227), that a resulting trust arises not so much from the plaintiff’s active intention not to enrich (Glover’s trust creation view) as from the absence of the plaintiff’s intent to enrich (the second species of Glover’s negative intention view). 89 Ibid, 21. 90 Ryall v Ryall, n 22 above (donor unaware of the transaction; see text with and in nn 94, 112–14 below); Lane v Dighton (1762) Amb 409 (Rolls Ct ) (same); Re Vinogradoff [1935] WN 68 (HC) (infant). In such cases, the presumed intention would be ‘impossible, improbable, or unenforceable’ (Chambers, Resulting Trusts, n 6 above, 34). 91 Chambers, ‘Resulting Trusts in Canada’, n 7 above, 390; see also Chambers, Resulting Trusts, n 6 above, 21–7; Chambers, ‘Resulting Trusts’, n 8 above, 249. 92 See n 35 above; see also nn 27 and 34 above. 86 87 88

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donor is unaware of a transaction which amounts to a gratuitous transfer of his property, a resulting trust will be presumed, and if the donor’s intent to make a gift cannot be demonstrated—as it will not be because the donor was unaware of the transaction93—then the resulting trust will return the benefit to the donor.94 Hence, the orthodox approach is able to accommodate even the difficult cases, even if some of them may be regarded as benign applications of the principle on marginal facts. Chambers’s first crucial move, then, is to take too seriously the presumption as to the donor’s intention.95 Then, in a further crucial move, Chambers argues that if the fact that the donor did not intend to benefit the recipient is the presumed fact from which the resulting trust arises, then it must follow that if it can be affirmatively established that the donor did not intend to benefit the recipient, a resulting trust must equally arise: the presumption is an inference of a fact drawn from the existence of other facts, whereas the resulting trust is the equitable response to those facts, proven or presumed.96

This key move both establishes the unjust enrichment approach to the resulting trust and opens up the prospect of a massive expansion of the resulting trust’s ambit. On this view, if it is not presumed but proven that the donor had no relevant intention at all, or that it was impaired in some way, a resulting trust will arise. Chambers97 cites Hodgson v Marks98 to justify this move. The elderly Mrs Hodgson was persuaded by her smooth lodger, Evans, to put the legal title to her house into his name, giving her to understand that she would be owner in all but name. After he had sold the property to Marks, the English Court of Appeal held that, on the basis of Rochefoucauld v Boustead,99 Evans held the property on trust for Mrs Hodgson, and that,

And, of course, if there are no other facts to rebut the presumption. Hence, in Ryall v Ryall, n 22 above, the resulting trust was imposed simply by reference to the underlying facts and without reference to a presumption at all (see text with nn 112–114 below). The reasoning in the text also explains a resulting trust over stolen property (Re Kolari [1982] 36 OR (2d) 473 (Dist Ct)); though there is here the question of whether this ought to be regarded as a constructive trust (see, eg Black v Freedman (1910) 12 CLR 105, 110 (HCA); Westdeutsche, n 28 above, 715–16). 95 Cf Rickett and Grantham (nn 46–7 above), and Swadling, ‘Explaining Resulting Trusts’, n 10 above, who also take it too seriously, though in very different ways. 96 Chambers, Resulting Trusts, n 6 above, 32 (emphasis added); see generally 32–3, 38–9. 97 See, eg ibid, 25, 34, 44, 101, 114, 139–40; Chambers, ‘Resulting Trusts’, n 8 above, 252–3. 98 [1971] 1 Ch 892 (CA); R Maudsley, ‘Bona Fide Purchasers of Registered Land’ (1973) 36 MLR 25; J Sweeney, ‘Presumed Resulting Uses and Trusts: Survivals—And a New Arrival?’ (1979) 14 Irish Jurist (ns) 282. 99 [1897] 1 Ch 196 (CA); see also McGillicuddy v Joy [1959] IR 189 (HC); Paragon Finance v Thakerar [1999] 1 All ER 400 (CA); T Youdan, ‘Formalities for Trusts of Land, and the Doctrine in Rochefoucauld v Boustead’ [1984] CLJ 306. 93 94

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on the basis of the Land Registration Act 1925, Marks was bound by her interest. But Russell LJ also held that the evidence is clear that the transfer was not intended to operate as a gift, and, in those circumstances, I do not see why there was not a resulting trust of the beneficial interest to the plaintiff.100

On Chambers’s view, this provides an example of a resulting trust arising not because of a gift or the apparent failure of a trust but because of the absence of the donor’s intent, that is, because of the independent demonstration of the fact which is usually presumed.101 However, Swadling argues that Hodgson v Marks is a case in which the court enforced an express trust102: in giving Mrs Hodgson to understand that she would be owner in all but name, Evans had in effect agreed to hold the property on trust for her,103 an express trust, which—since Rochefoucauld v Boustead meant that Evans could not hide behind any formalities required by the Statute of Frauds—could be enforced against him.104 On this view, the trust which was enforced in Hodgson v Marks was express and arose because of Mrs Hodgson’s actual intention; it did not respond either to an underlying essential fact or to the vitiation of her consent, and cannot therefore properly be described as either resulting or based on an unjust enrichment. In the absence of Hodgson, no authority justifies Chambers’s attempt to generate a resulting trust on the basis of demonstrating the intention which is said to be presumed. More fundamentally, if the proper focus of the enquiry in resulting trust cases is as to the underlying fact of the gift and not upon the donor’s presumed intention, then demonstrating that the 100 [1971] 1 Ch 892, 933 (CA). It is clear that transactions taking the form of gifts raise the presumption of a resulting trust, a presumption rebutted by demonstrating that a gift was in fact intended. If, however, the evidence demonstrates that no gift was intended, then both the presumption and the evidence pull in the same direction, in favour of the resulting trust, which may be Russell LJ’s point. 101 See n 97 above. 102 Swadling, ‘A Hard Look’, n 10 above; C Harpum, ‘The Uses and Abuses of Constructive Trusts: The Experience of England and Wales’ (1997) 1 ELR 437; unsurprisingly, R Chambers, ‘Resulting Trusts in Canada’ (2000) 38 Alberta Law Review 378, has not accepted this criticism. 103 Swadling, ‘A Hard Look’, n 10 above, 62. 104 Ibid, 66. In defence of his approach to Hodgson v Marks, Chambers poses the question: what ‘would the court have done if Hodgson had intended to create a trust, not for herself but for her niece?’ and answers that the court ‘would not enforce an oral, inter vivos trust, for the niece, but would require the lodger to hold the house on resulting trust for Hodgson’ (Chambers, ‘Resulting Trusts and Equitable Compensation’, n 7 above, 6). No doubt Swadling would reply that the approach in the text still holds good: it would again be an express trust in favour of the niece; in giving Mrs Hodgson to understand that her niece would be owner in all but name, Evans had in effect agreed to hold the property on trust for her, an express trust, which—because Rochefoucauld v Boustead meant that Evans could not hide behind any formalities required by the Statute of Frauds—could be enforced against him. Alternatively, a resulting trust for Mrs Hodgson could be justified on the basis of the approach set out in n 100 above. On neither approach would substituting her niece for Mrs Hodgson compel Chambers’s answer.

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donor did not intend to benefit the recipient is irrelevant to the question of whether a resulting trust arises—all that matters is whether the donor made a gift. Hence, neither authority nor principle justifies Chambers’s attempt to prove the fact presumed and generate a resulting trust as a consequence. Having taken the presumption seriously, and spun it into a presumption of negative intention which could also be affirmatively proved, Chambers then sought to justify the proprietary nature of the resulting trust which is thereby generated, arguing that the relevant property must remain identifiable in the defendant’s hands, and that title must not have been lost by becoming part of the defendant’s general assets. All of these various points come together in Chambers’s definition of the essential elements of the resulting trust105: [e]very resulting trust requires that the [donor] (i) has provided the property and (ii) did not intend to benefit the recipient in the circumstances and, (iii) is identifiable in the hands of the recipient and (iv) has never been a freely available part of his or her general assets before the right to . . . [claim them] arose.

The first issue is a matter of fact. The second goes to the question whether the plaintiff can prove that he did not intend to benefit the recipient, or that any relevant intent was vitiated or qualified. The third is a tracing identification requirement that the property to be fixed with the trust still identifiably exists106; if it does not, there is nothing upon which to fix the trust. The fourth is a limitation to balance the donor’s claim with competing third party claimants such as the recipient’s creditors, though, for Chambers, where the donor had no intention (for whatever reason) at the moment of the transfer to enrich, then the property has never been freely available to the defendant. On Chambers’s view, if these four elements are satisfied, equity will raise a new107 equitable title by means of the resulting trust. As to whether this resulting trust reverses unjust enrichment, first, the resulting trust—on (almost108) any analysis—is certainly restitutionary in pattern since it restores property to the claimant. Secondly, however, 105 Chambers, Resulting Trusts, n 6 above, 234; see 5, 32, 38, 144, 148, 151, 220, 225 on the evolution of these requirements; cf Birks, Unjust Enrichment 1st edn, n 5 above, 176–8, 264–6; Birks, Unjust Enrichment 2nd edn, n 5 above, 195–8, 304–7. 106 See generally L Smith The Law of Tracing (Oxford, Oxford University Press, 1996); see also E O’Dell, ‘Tracing’ (1999) 21 Dublin University Law Journal (ns) 131; C Rickett, ‘Old and New in the Law of Tracing’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Law Book Co, 2005) 119. 107 Chambers, Resulting Trusts, n 6 above, 52–54, 76–77, 102–4, 131–2; Rickett and Grantham’s basic objection to Chambers’s analysis turns on this point; on their view, beneficial ownership of the trust assets never leaves the resulting trust beneficiaries (see especially Rickett and Grantham, n 46 above, chs 3, 12 and 13); again, unsurprisingly, Chambers has not accepted this criticism (see Chambers, ‘Resulting Trusts and Equitable Compensation’, n 7 above, 4–5). 108 See Rickett and Grantham’s objection noted in the previous footnote.

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Chambers goes further, arguing that the resulting trust is not only restitutionary in pattern but also reverses unjust enrichment in principle because it responds to the impairment of the donor’s intention, which impairment matches a pattern which includes mistake and failure of consideration.109 Thirdly, if so, then the resulting trust would be subject in principle to the defences which that area of the law provides,110 which could well serve to meet objections that an unjust enrichment view of the resulting trust would be to expand it too far. Finally, in Chambers’s view, the resulting trust reverses unjust enrichments because equity actively raises a new equitable title, rather than passively protecting a pre-existing and continuing one.111 He therefore posits that the venerable resulting trust case of Ryall v Ryall112 might be regarded as the core case of proprietary restitution.113 However, this analysis is constructed upon a misguided focus on the donor’s intention that consequently takes the presumption of intention too seriously. The vitiation of the donor’s intent is not in any sense constitutive of the resulting trust; that trust arises because of the existence of an underlying essential fact, such as a gift or an apparently failing trust; although, of course, it can be rebutted by proof of the donor’s intention. Hence, the proper focus of the inquiry generating the resulting trust in the first place is not upon the intention of the donor at all, but is instead upon the underlying essential fact. Furthermore, in taking the presumption too seriously, Chambers’s analysis is unnecessarily concerned with whether the presumption is as to whether the donor intended not to benefit or did not intend to benefit the recipient, and it misconceives the role of the presumption by seeking to prove the fact presumed and to generate a resulting trust as a consequence. Moreover, Ryall v Ryall, far from lending 109 This is the work of chs 5 and 6 of Chambers, Resulting Trusts, n 6 above; cf Chambers, ‘Resulting Trusts’, n 8 above, 259–60. It is a crucial building block in Chambers’s edifice. If it is right, then Chambers’s analysis conforms to basic unjust enrichment doctrine, at least on the view of the subject propounded in Birks, Introduction, n 2 above; cf n 122 below. 110 Chambers, Resulting Trusts, n 6 above, 236–42. 111 See especially ibid, 51–5, rejecting Hackney’s notion of ‘proprietary arithmetic’ (J Hackney, Understanding Equity and Trusts (London, Fontana, 1987) 153–4). Gardner’s more sophisticated notion of ‘proprietary inertia’ (S Gardner, An Introduction to the Law of Trusts (2nd edn, Oxford, Clarendon Press, 2003) 132–7)—that the donor should not be taken to have alienated except by voluntary disposition—can accommodate resulting trusts predicated upon either pre-existing or new titles, but in either case cannot accommodate resulting trusts raised to reverse unjust enrichments. 112 (1739) 1 Atk 59 (HC in Chancery). 113 Having observed that Birks treated Kelly v Solari (1841) 9 M&W 54 (Exchequer) as the ‘core case’ of personal restitution (Birks, Unjust Enrichment 1st edn, n 5 above, 3; Birks, Unjust Enrichment 2nd edn, n 5 above, 3), Chambers comments that Ryall

might be regarded as the Kelly v Solari of proprietary restitution. It is the first of many cases of resulting trust which prove that English law has long provided property rights to the enrichment itself and not merely personal rights to its value (Chambers, ‘Resulting Trusts’, n 8 above, 256).

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support to Chambers’s analysis, seems in fact emphatically to point the other way. In that case, an executor diverted the testator’s estate to the purchase of lands in his own name, and was held to hold the lands on resulting trust for the estate’s legatees. The Lord Chancellor, Lord Harwicke, explained that a resulting trust would arise ‘if the estate is purchased in the name of one, and the money paid by another’.114 There is no mention of the presumption at all; instead, the analysis was directed simply to the underlying essential fact which gave rise to the trust. Let us by all means have Ryall as the paradigm case, since it entirely supports the view of the issue advanced here. Although it is the most sophisticated and sustained modern statement of the resulting trust to reverse unjust enrichment, Chambers’s analysis was not a Venus rising fully formed from the waves; there were important precursors. Birks argued that the trust in Hodgson v Marks was restitutionary at least in pattern,115 that traditional resulting trusts are restitutionary both in pattern and in origin,116 and that the orthodox approach to resulting trusts is therefore conservative and incomplete.117 For him, therefore, Lord Browne-Wilkinson’s restatement of the orthodoxy in Westdeutsche overly narrowed the ambit of resulting trusts, ‘shut[ting] them up in their own little enclave’.118 Instead, on his view, donors should be able to rely on a resulting trust if they can prove the fact, which the presumption usually presumes, that the donor did not intend to benefit the recipient.119 Many have found this analysis attractive120; indeed, Chambers has amplified Birks’s approach to the presumption, placing even greater emphasis upon Hodgson v Marks, arguing that the trust therein is resulting not only in pattern but also in origin.121 But, as the analysis above demonstrated, Hodgson simply will not bear this weight. Nevertheless, returning to the theme, Birks finally argued that the fact presumed in the context of resulting trusts is the absence of an explanatory basis for the transfer, which should be seen for that reason as trusts responding to unjust enrichment.122 However, this misrepresents the (1739) 1 Atk 59, 60 (HC in Chancery); see also text with and in nn 90–4 above. Birks, Introduction, n 2 above, 58–60; cf Birks, ‘Trusts Raised’, n 4 above, 16 at n 50. Birks, Introduction, n 2 above, 60–1. Birks, ‘Restitution and Resulting Trusts’, n 4 above. Birks, ‘Trusts Raised’, n 4 above, 115. Ibid, 17–18; cf Birks, ‘Restitution and Resulting Trusts’, n 4 above. See Millett, n 9 above. See also H Norman, ‘Tracing the Proceeds of Crime—an Inequitable Solution?’ in Birks (1995), 95, 102; Simspon (2000), 4 note 9; 20 note 88 sees the restitutionary account underpinning Virgo and O’Sullivan, above n 35, and R Nolan, ‘Dispositions Involving Fiduciaries: The Equity to Rescind and the Resulting Trust’ in Birks and Rose, n 4 above, 119. 121 Chambers, Resulting Trusts, n 6 above, 25, 101; see text with nn 97–104 above. 122 Birks, Unjust Enrichment 1st edn, n 5 above, 265; Birks, Unjust Enrichment 2nd edn, n 5 above, 305. In other words, if Chambers’s analysis plugs this view of the presumption into Birks’s former views on restitution (n 109 above), Birks’s own analysis plugs the same view of the presumption into his final views on unjust enrichment. 114 115 116 117 118 119 120

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presumption in precisely the same way as Chambers does, and fails for the same reason. Another route to the resulting trust to reverse unjust enrichment, which does not set out from Hodgson v Marks or seek to misrepresent the presumption, is that taken by Sarah Worthington, who argues that, in cases where assets are transferred pursuant to mistake or failure of consideration, it is generally the case that the transferee receives the asset for no consideration. Since a gift is clearly not intended, it seems appropriate to adopt the presumed resulting trust analysis.123

On this analysis, the necessary want of consideration can arise as a matter of fact, as in the case of voluntary or mistaken payments, or as a matter of law, as in the case of ultra vires contracts. Because it makes no attempt to reformulate the orthodox presumed resulting trust but instead attempts to bring impaired transfers within it, this is an attractive analysis. However, there is a fundamental contradiction at its core. Take the example of a mistaken gift. Either the donor makes a gift, in which case a traditional resulting trust arises (and may of course be rebutted), or the donor makes a mistake, in which case the transfer cannot amount to a gift, and any trust which reverses the transfer cannot be a traditional resulting trust.124 Despite the problems at the heart of Chambers’s analysis, judicial support for the ‘restitutionary resulting trust’125 seems nevertheless to be growing. In the Court of Appeal in Twinsectra v Yardley, Potter LJ held that126: the role of intention in resulting trusts is a negative one, the essential question being whether or not the provider intended to benefit the recipient and not whether he or she intended to create a trust. The latter question is relevant to whether the provider succeeded in creating an express trust, but its relevance to the resulting trust is only as an indication of lack of intention to benefit the recipient. 123 S Worthington, ‘Proprietary Restitution—Void, Voidable and Uncompleted Contracts’ (1995) 9 Trust Law International 113, 114; Worthington, n 21 above, 68, 163, 174, 233–7, 279–80. Though Birks and Chambers make similar points about mistake and failure of consideration, Worthington’s analysis demonstrates that such points can be made without being tied up with Hodgson v Marks. 124 Swadling, ‘A New Role’, n 10 above, 111–12, 115–16, 130–1 gives a similar answer to a similar argument made by Birks:

[the] reason why such a presumption of intention is in appropriate in the case of a mistaken gift is that we are here dealing with a situation in which the actual state of mind of the transferor is known to the court; there is consequently no room for the operation of any presumption (116). 125 Twinsectra v Yardley [1999] Lloyd’s Rep Bank 438, 462 (CA); revised [2002] 2 AC 164 (HL). 126 Ibid, 457, following Chambers, Resulting Trusts, n 6 above.

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On appeal in the House of Lords, Lord Millett went further, referring with apparent approval to the ‘central thesis’127 of Chambers’s book that128: a resulting trust arises whenever there is a transfer of property in circumstances in which the transferor . . . did not intend to benefit the recipient. It responds to the absence of an intention on the part of the transferor to pass the entire beneficial interest, not to a positive intention to retain it.

This is unsurprising; his Lordship had made similar comments in the Privy Council in the earlier case of Air Jamaica v Charlton, suggesting that the resulting trust arises by operation of law . . . [and] gives effect to intention . . . since it responds to the absence of any intention on . . . [the donor’s] part to pass a beneficial interest to the recipient.129

This differs quite substantially from the approach of Lord BrowneWilkinson in Westdeutsche, to which no reference was made either by Potter LJ in Twinsectra or by Lord Millett in Air Jamaica. However, although Lord Millett in Twinsectra commented that Lord BrowneWilkinson had given ‘an authoritative explanation of the resulting trust in Westdeutsche’,130 he immediately diluted this by commenting that ‘its basis ha[d] been further illuminated’131 by Chambers, and he undermined it even further by adopting and applying many elements of Chambers’s approach. The move from Westdeutsche to Chambers on the basis that the latter has ‘further illuminated’ the former suggests that one is a development of the other, whereas they are quite obviously antithetical conceptions; with respect, such legerdemain is unworthy of Lord Millett; if he had wanted to reject Westdeutsche, he should have done so expressly.132

[2002] 2 AC 164 [92]. Ibid. In Carlton v Goodman, n 23 above, Mummery LJ treated this passage from Lord Millett’s speech as supporting Chambers’s view. 129 [1999] 1 WLR 1399, 1412 (PC); cf El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, 734 (HC); rvs’d on other grounds [1994] 2 All ER 685 )CA); see also n 9 above; Rickett and Grantham, ‘A Rather Limited Doctrine’, n 11 above; Chambers, ‘Resulting Trusts’, n 8 above, 248 (‘prevailing view’). 130 [2002] 2 AC 164 [91] (HL). Lord Millett saw the relevant trust as resulting, whereas Lord Hoffmann (Lords Slynn and Steyn concurring: [2], [7]) treated it simply as express ([13]–[17]) and therefore said nothing on this point. Confusingly, Lord Hutton agreed with both speeches ([25]). 131 Ibid. 132 Because he did not do so expressly, Gardner argues that Air Jamaica ‘possess[es] no authority’ on this point (n 111 above, 132 at n 52). The Court of Appeal in Carlton v Goodman, n 23 above, [23]–[26] (Mummery LJ), [33]–[35] (Ward LJ) chose not to take sides on this debate between Westdeutsche, Twinsectra and Air Jamaica. 127 128

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CONCLUSION

In Vandervell, the House of Lords perceived little difficulty with resulting trust principles,133 but Megarry J made heavy weather of their speeches, and, in distinguishing between presumed and automatic resulting trusts, began a process by which those principles could now find themselves in a mess.134 Indeed, the Court of Appeal in Carlton v Goodman135 treated the juridical basis of the resulting trust as an open question which they seemed relieved not to have to answer in that case.136 Something therefore needs to be done to tidy up that mess; and it is not the kind of issue that can be resolved simply by citation of authority. Swadling could no more persuade Chambers that Lord Millett is wrong simply by citing Westdeutsche than Chambers could persuade Swadling that Lord Browne-Wilkinson is wrong simply by citing Air Jamaica. Instead, an argument of principle has to be constructed where such principles are informed by precedent, logic and policy.137 On that basis, the best way to tidy up the mess is to strip the resulting trust down to its essentials, and recognise as a consequence that it arises by operation of law in the case of gifts and of trusts which apparently fail, and that it may be displaced by intention. Hence, part II of this essay demonstrated that such a coherent statement of the orthodoxy may easily and logically be distilled from the existing body of precedent. Nevertheless, it has recently been suggested that the mess may be better tidied up by explaining the resulting trust on unjust enrichment principles. 133 ‘The law with regard to resulting trusts is not in doubt’ ([1967] 2 AC 291, 307 (per Lord Reid); ‘I do not think that any questions of the principles of law [on resulting trusts] to be applied give rise to any difficulty or are in doubt’ (ibid, 312 (per Lord Upjohn)); they were ‘really elementary principles’ (ibid, 314 (per Lord Pearce)). 134 Those who attempt to displace the orthodoxy often seek to justify that displacement by claiming that the orthodoxy in fact ‘masks a widespread uncertainty’ (Chambers, Resulting Trusts, n 6 above, 1); ‘social pressures and analytical revisions, not to mention some wilful analytical sloppiness, have knocked the old doctrine of resulting trusts badly out of shape’ (Birks, ‘Restitution and Resulting Trusts’, n 4 above, 338). Sed quaere? As Berkeley observed of a similar process undertaken by philosophers:

On the whole, I am inclined to think that the far greater part, if not all, of those difficulties which have hitherto amused philosophers and blocked up the way to knowledge, are entirely owing to ourselves—that we have first raised a dust and then complain we cannot see (G Berkeley, A Treatise Concerning the Principles of Human Knowledge (1710) in A Luce and T Jessop (eds), The Works of George Berkeley, Bishop of Cloyne, vol 1 (London, Nelson, 1948–57) (Kraus Reprint, Nendeln, Liechtenstein, 1979) 26). 135 [2002] EWCA Civ 545 (CA). 136 In particular, Ward LJ was moved to refer to the ‘tortuous complications’ of the law in this area [43] and commented that he liked ‘jury questions’—such as whether a presumption of resulting trust had been rebutted on the facts—because they ‘are much easier to answer than arcane questions of the exact nature of resulting trusts’ [40]. 137 C Rotherham, Proprietary Remedies in Context (Oxford, Hart Publishing, 2002); E O’Dell, ‘Fermat’s Last Theorem and the Context of Proprietary Remedies’ (2005) 19 Trust Law International 97.

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This move should be resisted. Unjust enrichment is a standard external to the resulting trust which it is unnecessary to impose upon it to solve its problems or to provide it with an underlying explanation. In particular, the analysis offered by Birks and Chambers fundamentally misconceives the roles of the donor’s intention and of the presumption thereof. The donor’s intention is not constitutive of the resulting trust but instead is merely responsive to a trust which arises because of the existence of an underlying essential fact, such as a gift or an apparently failing trust. Hence, part III of this essay established that, despite some favourable dicta, it ought not to displace the orthodoxy. As to the location of the orthodoxy on the map of the law, there are at least two taxonomic responses. First, on the one hand, Birks long argued that all rights, personal and proprietary, are responses to consent, wrongs, unjust enrichment or other events.138 He is followed in this by Chambers,139 who argues that, in these terms, the resulting trust is restitutionary, responding to unjust enrichment, but not to consent, wrongs or other events. Whether or not this ultimately proves a helpful taxomony,140 the analysis here—by directing attention to the underlying facts of the gift or the trust which apparently fails—demonstrates that the resulting trust does not respond to unjust enrichment or to consent or to wrongs; to that extent, the resulting trust responds to the other events of the gift or the apparent failure of the trust. This might be a little unsatisfying for Linnaean taxonomists, but the Common Law is a messy thing, pragmatic, casuistic and often not fitting into prettily labelled boxes. Whilst the fact that this might offend our sense of order might provide a basis for an argument of what the law ought to be, it certainly does not provide a touchstone for a statement of what it is. Secondly, on the other hand, in Foskett v McKeown,141 the House of Lords sharply distinguished between rights born of property and rights born of unjust enrichment. Unsurprisingly, Chambers criticises this opposition142; but, to the extent that it is meaningful, the analysis here demonstrates that resulting trusts are of the former kind and not of the latter. For all of these reasons, therefore, there is no justification for the annexation of resulting trusts by the law of restitution for unjust enrichment. Consequently, in the end, there is no such thing as a restitutionary resulting trust or a resulting trust to reverse unjust enrichment, and it’s a good thing too! 138 See, eg Birks, Unjust Enrichment 1st edn, n 5 above, 26–7, 30–4; Birks, Unjust Enrichment 2nd edn, n 5 above, 28–30, 32–8; cf S Hedley ‘Rival Taxonomies Within Obligations. Is there a Problem?’ in Degeling and Edelman, n 106 above, 77. 139 Chambers, ‘Resulting Trusts’, n 8 above, 250–5. 140 O’Dell, ‘Fermat’s Last Theorem’, n 137 above. 141 [2001] 1 AC 102, 109 (Lord Browne-Wilkinson), 127 (Lord Millett). 142 Chambers, ‘Resulting Trusts’, n 8 above, 254–5.

20 Rights, Remedies and Causes of Action RI GHTS , REMEDI ES AND CAUS ES OF ACTI ON

S T E P H E N A S M ITH * S TEPHEN A S MI TH

I

N HIS 1999 Blackstone Lecture, ‘Rights, Wrongs, and Remedies’,1 Peter Birks argues that the conventional—and Blackstonian—view that court orders are ‘remedies’ is misleading in two respects. First, it suggests that court orders deal with something other than rights. To describe court orders as remedies implies, as Blackstone intended,2 that court orders respond to rights infringements, and as such are distinct from those rights. This is misleading, Birks argues, because court orders are themselves sources of rights, no different in this regard from other rights-creating ‘events’ such as making a contract or receiving a mistaken payment.3 The second respect in which the conventional terminology is misleading is that it suggests the rights to which court orders give effect arise exclusively from wrongs.4 The reality, Birks argues, is that courtordered rights frequently arise from non-wrongful events. For example, a court order to perform a contract confirms a right—to the performance of a contract—that arises from the non-wrongful event of making a contract. Similarly, orders to pay a debt or to return money obtained by mistake confirm rights (to payment of the debt, to restitution of the mistaken transfer) that arise from the non-wrongful events of incurring a debt and receiving a mistaken payment. According to Birks, only where court orders confirm rights that arise from wrongful events, as, for example, where a * Professor of Law and William Dawson Scholar, McGill University. I am grateful to Jon Ostrega for research assistance. 1 P Birks, ‘Rights, Wrongs, and Remedies’ (2000) 20 Oxford Journal of Legal Studies 1. In Birks’s article and this essay ‘court orders’ refers exclusively to orders that arise from a private law dispute and that require defendants to do or not do something. Declarations raise different issues. 2 Blackstone’s views can be found in W Blackstone, Commentaries on the Law of England, Volume 3: A Facsimile of the First Edition of 1765–1769 (Chicago, IL, University of Chicago Press, 1979). Although this essay defends Blackstone’s terminology, it makes no attempt to situate that defence within Blackstone’s broader arguments. 3 Birks, n 1 above, 16, 20–2. 4 Ibid, 25.

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court order requires a defendant to pay compensation to a claimant whom the defendant negligently injured, is the order legitimately described as a remedy. But even here the term may mislead, as it suggests the remedy is something other than a right. Birks concludes that the word remedy ‘should be eliminated from our analytical vocabulary’.5 This essay examines Birks’s arguments and concludes that neither provides a good reason to jettison the conventional practice of describing court orders as remedies.6 The position defended in this essay is that court orders are qualitatively different from ordinary rights-creating events, if indeed they are properly described as rights-creating events at all. Further, describing court orders as ‘remedies’ appropriately highlights what is distinctive about court orders as compared with (ordinary) rights-creating events. Although the content of a court order—what the defendant is ordered to do or not do—often replicates the content of a duty that arose from a non-wrong, the reason for making a court order is invariably that the defendant committed or, exceptionally, was about to commit, a wrong. Thus, while there is a sense in which some court orders are not (because of their content) remedial, there is another sense in which all court orders are (because of the reason for making them) straightforwardly remedial. Court orders provide a remedy for a right that was infringed or, exceptionally, is about to be infringed.

I

RE M E D I E S AN D R I G H T S

Birks’s first objection to describing court orders as remedies is that the description implies court orders do not deal in rights or, more accurately, that they are not rights-creating events. Birks insists that court orders are rights-creating events in the same way that contracts or mistaken payments are rights-creating events. Court orders differ from other rights-creating events, in Birks’s account, merely in the formal sense that the rights to which they give rise are typically7 identical to rights that existed prior to the court order. A typical court order, Birks says, can be understood as transIbid, 3. Reaching the same conclusion, though on different grounds, is K Barker, ‘Rescuing Remedialism in Unjust Enrichment Law: Why Remedies are Right’ (1998) 57 Cambridge Law Journal 301. The distinction between the content and justification of a court order is also discussed, though in different terms and in a different context, by D Friedmann, ‘Rights and Remedies’ in N Cohen and E McKendrick (eds), Comparative Remedies for Breach of Contract (Oxford, Hart Publishing, 2005) 12–15. 7 Typically’ because (as is discussed in the text accompanying n 24 below) not all court orders confirm earlier rights (eg nominal damages create new duties). It is not clear whether and to what extent Birks accepted that court orders could transform or create new legal duties. It is clear, however, that the court orders on which he based his argument in Birks, n 1 above, were court orders that, in his view, confirmed existing rights. 5 6

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forming or novating the claimant’s pre-existing right.8 Once the order is made, it functions as a source of rights, like any other right-creating event. Understood in this way, court-ordered rights must fit within Birks’s general taxonomy of rights-creating events. In this taxonomy, all rights arise from ‘events’, and events are either wrongs, manifestations of consent, unjust enrichments or miscellaneous events. Since court orders do not fit within any of the nominative categories, they must be, as Birks confirms,9 miscellaneous events. In the Birksian taxonomy, court orders are therefore found alongside events such as earning taxable income or salvaging cargo. Birks says little specifically about either the nature of court orders, qua court order, or the rights to which they give rise. Having noted that the typical court order effectively novates the claimant’s pre-existing rights, the focus of Birks’s attention in his Blackstone Lecture (and elsewhere) is explaining the events that give rise to pre-existing rights. His primary target in the Lecture is the belief that the rights that courts enforce always arise from wrongs. But it seems clear that a complete account of court orders must also consider the ways in which court orders and court-ordered rights differ from other events and rights in the Birksian taxonomy. Making an agreement, earning income, committing a wrong and receiving a mistaken payment are events in the everyday sense that they are things that, from the law’s perspective, just happen in the world. They are events to which the law provides a response in the form of recognising that a legal right has come into existence. Court orders are not events in this sense. From the law’s perspective, court orders do not just happen in the world: they are the product of legal officials’ decisions regarding the rights and duties of the parties before them. The difference is not merely that court orders are the result of intentional norm-creating acts; contracts are also the result of norm-creating acts. It is that court orders are the product of legal officials’ views about rights arising from other events and, crucially, about the appropriateness of enforcing those rights by means of a judicial order. This is why court orders, unlike contracts, mistaken payments and so forth, call for legal justification. Fundamentally, a court order is not an event (ie something that happens in the world to which the law responds); it is a legal response to an event (or events). The rights that allegedly arise from court orders also differ from ordinary legal rights. The most obvious difference (bearing in mind that 8 Birks, n 1 above, 15 (‘The rights which we ultimately enforce through the machinery of execution are not the rights which we stand on in making our claims in court. The rights we claim are transformed or novated, and the rights which we enforce through the various means of execution are rights born of the order or judgment of a court.’). 9 Ibid. 27; P Birks, ‘The Concept of a Civil Wrong’ in D Owen (ed), Philosophical Foundations of Tort Law (Oxford, Clarendon Press, 1995) 29, 50.

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we are concerned exclusively with orders to do or not do something) is that court-ordered rights cannot be enforced in courts. It is to the sheriff or the bailiff that a successful claimant must turn if the defendant refuses to comply with a court order. A related point is that, read literally, court orders are not statements about individuals’ rights and duties. The judgments that precede court orders include statements about the parties’ rights and duties, but the order is just that—an order. The defendant is literally ordered to do such and such act or pay such and such sum.10 It is an essential feature of a court order that it is directly backed by the coercive machinery of the state. If the defendant does not do what he is commanded to do, then he is liable, without further recourse, to be thrown in jail or to have his property seized. Taken at face value, a court order is not a statement about what the defendant ought to do, as a matter of right, but a command—equivalent to the order of a gunman.11 Significantly, declarative orders are different: a declaration is precisely a pronouncement regarding the parties’ rights and duties. Not coincidentally, no sanction is attached to a declaration. The rights pronounced in declarations are enforced in the ordinary way: by going to court. For these reasons, it may be questioned whether it is proper to describe court orders as rights-creating events. But even if court orders are rights-creating events, both they, and the rights to which they give rise, are qualitatively different from other events and rights. It is therefore appropriate to give them a distinctive label, as Blackstone does. It remains only to ask whether that label should be ‘remedy’.

II

R E M E D I E S A N D W RO N G S

This brings us to Birks’s second objection to describing court orders as remedies: the description implies that court orders are always responses to wrongs. Although ‘remedy’ has different meanings, it is natural to assume, as the conventional understanding indeed assumes, that to describe a court order as a remedy implies that it is a redress for a wrong. This is misleading, Birks maintains, because while some court orders are responses to wrongs (for example, an order to pay damages), many are not. It is incontrovertible that, viewed from one perspective, many court orders are not remedial. Considered in terms of their content, that is to say, in terms of what they require defendants to do or not do, many court orders confirm duties that arise, as Birks observes, from non-wrongs. 10 For example, ‘IT IS ORDERED THAT the defendant: pay the claimant the sum of L . . .’; ‘THIS COURT orders that the agreement dated [. . .] referred to in the Particulars of Claim be specifically performed and carried into execution’. 11 On the significance of which see HLA Hart, The Concept of Law (Oxford, Clarendon Press, 2nd edn, 1994) 18–26.

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These duties are not themselves remedial. The examples mentioned earlier of orders to specifically perform a contract, to pay a debt or to make restitution of money received by mistake fall into this category. In each of these cases, the court order confirms a duty that arose from a non-wrong (entering a contract, incurring a debt, receiving a mistaken payment respectively). The obligation to perform a contract is not an obligation to remedy a wrong or anything else for that matter. But our interest in court orders extends beyond their content. Equally important is the question of when a court order will be made at all, regardless of its content. Considered from this perspective, a court order that is non-remedial in content might still properly be described as remedial. This would be the case where the reason or justification for making the order is that the defendant failed to perform a pre-existing duty (even if the duty’s content is not remedial). Orders of specific performance fall into this category. An order to perform a contractual obligation is an order to perform a duty that arose from a non-wrongful event. But a claimant will not be granted specific performance merely on proof of a binding contract with the defendant. If, on Monday, I contract to purchase goods from a vendor to be delivered on Friday, no court will grant me an order on Tuesday commanding the vendor to make the delivery. Even if the goods are unique, such that damages would be an inadequate remedy, the court will not grant specific performance unless it is proven that the contract has been breached or, exceptionally, that there is a clear threat of breach.12 The same precondition is applied to orders to pay a debt. Like orders of specific performance (which they closely resemble), orders to pay a debt are only made on proof that the defendant has breached the primary obligation. It is true that a debt, like a non-monetary contractual obligation, is not due until the date for performance of the obligation. But the obligation to pay the debt exists prior to the due date, and a court could, if it were so inclined, make an order before the due date; for example, a court could order on 1 December that ‘the defendant pay the claimant $100 on or before 1 January’. Courts are in principle perfectly willing to make orders with respect to future acts: for example, courts will order defendants to do or not do acts in order to prevent a future trespass or nuisance. But in the case of contractual obligations and debts, they will not order performance unless the defendant has failed to perform or, exceptionally, is about to fail to perform. Orders of specific performance and orders to pay a debt are therefore properly described as remedial. Even if their content is not remedial, these orders provide a remedy for a right that was infringed or, exceptionally, is 12 A Burrows, Remedies for Torts and Breach of Contract (Oxford, Oxford University Press, 3rd edn, 2004) 456; Hasham v Zenab [1960] AC 316 (PC); Zucker v Tyndall Holdings plc [1992] 1 WLR 1127 (CA).

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about to be infringed.13 The remedy is to require the defendant to satisfy that right. The question is whether specific performance and debt are exceptional in this regard or whether, instead, every ‘cause of action’14 in private law includes proof of an actual or threatened wrongs. Must plaintiffs seeking court orders always show that their rights have been, or are about to be, infringed? As noted earlier, the focus of Birks’s arguments in his Blackstone Lecture and elsewhere is on explaining the events that give rise to substantive rights and the nature of those rights. He says little about court orders per se. But it seems clear that for Birks many court orders remain non-remedial even when they are viewed from the perspective of their cause of action. Indeed, he appears to regard ‘cause of action’ and ‘event’ as synonymous; they are alternative names for the set of facts that the claimant must prove in order to obtain relief from a court. Thus, in a discussion of mistaken payment cases, Birks writes: ‘As soon as the mistaken payment is received the cause of action is complete.’15 Elsewhere he describes the cause of action in a claim for restitution of an unjust enrichment as ‘the precise facts which render an enrichment unjust and from which the obligation to make restitution arises’.16 Speaking more generally, Birks states in his Blackstone Lecture that manifestations of consent, unjust enrichments and miscellaneous events ‘generate rights directly realizable in the courts’, adding that: ‘“Directly” here means they are realized without the courts having to conceptualize the immediate reason for their intervention as a wrong consisting of the violation of a primary right.’17 Since manifestations of consent, unjust enrichments and the miscellaneous rights-creating events are non-wrongs, it follows, in Birks’s scheme, that many causes of action do not require proof of a wrong: Causes of actions are aggregations of facts which happen in the world and suffice to trigger a legal response. A cause of action that is a not-wrong is one which has this effect without being, or having to be characterized as, a wrong.18 13 Strictly speaking, a court order is ‘preventative’ rather than ‘remedial’ in cases where the relevant wrong is only anticipated. For the purposes of this essay, the important point is that Birks supposes that a cause of action need not include reference to a wrong in either of these senses. Birks himself accepts that a duty may be remedial (in content) even if the event that gives rise to it is merely an anticipated wrong: see P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 University of Western Australia Law Review 1, 40. 14 A cause of action is ‘every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment’: Read v Brown [1889] 22 QBD 128, 131 (per Lord Esher) (CA). Lord Diplock gave a similar definition in Letang v Cooper [1965] 1 QB 232, 242–3 (CA) (‘A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person’). 15 Birks, n 1 above, 28. 16 Birks, n 9 above, 32. 17 Birks, n 1 above, 27. 18 Ibid, 25.

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Birks is, of course, aware that individuals do not generally seek court orders unless they have a complaint of some kind. But, as the previous quote makes clear, he regards such complaints as unimportant to the explanation of court orders. In an essay published three years before his Blackstone Lecture, he explicitly acknowledges that a claimant seeking specific performance of a contract will have a ‘grievance’ and would ‘feel himself wronged’. But he concludes that in such cases the claimant ‘would not technically be relying on a wrong’.19 For the reasons just explained, this conclusion is difficult to accept in the case of specific performance and debt. It is true the claimant does not need to prove a wrong to establish a right to the performance of a contract. But the actual order of specific performance that the claimant is seeking requires proof of a wrong or anticipated wrong. This is a fundamental feature of the cause of action in a request for specific performance. The conclusion that specific performance orders are properly described as remedial does not prove that all court orders are remedial. As will be explained below, orders of specific performance (and orders to pay a debt) are in certain important respects unique. The discussion, which is prefaced by some general comments on pre-existing rights, will focus on three important categories of ‘non-contractual’ orders: injunctions, damages and orders to make restitution.

III

S U B S TAN T I V E RI G H T S

Ordinary or ‘substantive’ legal rights are rights that individuals possess by virtue of what they do or what happens to them in their day-to-day lives, prior to going to a court.20 In the common law tradition, the primary way we know such rights exist is through court judgments. But judgments, even ground-breaking judgments, do not, in such cases,21 create the right: the judgment merely recognises a right that (in theory anyway) exists prior to the court’s judgment. From a court’s perspective, substantive rights are ‘already-existing’ rights. As Birks makes clear, substantive rights arise from events, loosely understood (‘loosely’ because the event may be coming of age or moving into a jurisdiction). Indeed, this is true by definition: if a right exists prior to going to court, then it must have arisen by virtue of certain facts in the world. 19 P Birks, ‘Definition and Division: A Meditation on the Institutes’ in P Birks (ed), The Classification of Obligations (Oxford, Oxford University Press, 1997) 1, 26. 20 See eg R Zakrzewski, Remedies Reclassified (New York, Oxford University Press, 2005) 13 note 27, drawing on R Goode, ‘Property and Unjust Enrichment’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Clarendon Press, 1991) 222–3. 21 ‘In such cases’ because court orders sometimes create new rights.

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Following Birks (and the Roman law sources on which he draws), rights-creating events can be divided according to whether they are wrongs or non-wrongs, with the latter further divided according to whether they are manifestations of consent, unjust enrichments or miscellaneous events. From one perspective, ‘wrongs’ and ‘non-wrongs’ operate at different levels in Birks’s taxonomy: the concept of a right arising from wrong presupposes the prior existence of rights arising from non-wrongs. This distinction is often expressed by saying that rights arising from nonwrongs are ‘primary rights’ while those arising from the (wrongful) breach of such rights are ‘secondary rights’.22 But qua substantive rights there is no difference between primary and secondary rights: in each case the right arises from an event, prior to anyone going to a court. Carelessly injuring my neighbour typically gives rise to a duty, effective from the moment of the injury, to pay my neighbour a sum of money by way of compensation. Receiving money by mistake from my neighbour gives rise to a duty, from the moment of receipt, to pay my neighbour an equivalent sum of money. Formally, the duties are identical. In the stripped-down version just presented, this taxonomy leaves unanswered many questions about the specific kinds of events, whether wrongs or non-wrongs, that give rise to rights, and about the nature of those rights. From the perspective of understanding court orders, a particularly important, and difficult, question is how to determine which rights pre-exist the judgments that recognise them and which rights are instead created by those judgments. Until recently, this question has largely been ignored by judges and academics. With the notable recent exception of Rafael Zakrzewski’s Remedies Reclassified,23 writers rarely distinguish between court orders that confirm already-existing rights and orders that transform those rights or create new ones. Indeed, it often seems to be assumed that the test for whether a substantive right exists is whether a court order in the same terms can be obtained. Birks himself says little directly about this issue. He is a vociferous critic of the idea that judges have discretion in granting or refusing relief,24 but judicial discretion and judicial right-creation are only weakly linked. In theory, courts could grant a particular kind of right-creating order systematically (in which case the claimant, prior to coming to court, would have a right to the order even if she did not possess the right recognised in the order); equally, courts could 22 According to B Rudden, in a letter published in (1990) 10 Oxford Journal of Legal Studies 228, the distinction between primary and secondary, familiar to contemporary lawyers since Lord Diplock’s speech in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 828–9 (HL), was introduced into English law by John Austin, in J Austin, Lectures on Jurisprudence or the Philosophy of Positive Law (St Clair Shores, MI, Scholarly Press, 1977) 44–7, 795–6, following Robert Pothier, in R Pothier, A Treatise on the Law of Obligations, William D Evans trans (1826) 183–6. 23 R Zakrzewski, n 20 above. 24 See Birks, n 1 above, 23.

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have discretion regarding orders that confirm substantive rights (in which case the claimant prior to coming to court would have no right to the order even though she would possess the right recognised in the order, if an order were made). Whatever Birks’s position on this issue, it is clear that courts sometimes refuse to enforce substantive rights, as, for example, when they refuse specific performance of a contract of personal service, and that court sometimes create new rights, as, for example, when they order punitive damages.25 Whether these examples are exceptional is a difficult question. For present purposes it is sufficient to acknowledge that, even if court orders sometimes recognise new or transformed rights, court orders regularly confirm already-existing rights. An order of specific performance, when it is made, confirms the claimant’s already-existing right to performance of the contract. The question addressed in this essay is not whether ‘right-confirming’ orders are made—this is assumed—but whether their cause of action includes proof of an actual or anticipated wrong.

IV

INJUNCTIONS

At first blush, it might be thought a claimant seeking an injunction against a nuisance, trespass or other interference with property rights is in the same position as a claimant seeking specific performance. In such cases,26 an injunction, like an order of specific performance, will only be granted on proof that the defendant has infringed the defendant’s rights or, exceptionally, is about to infringe them.27 But this conclusion may be too quick. An injunction, like an order of specific performance, gives rise to in personam rights (assuming it gives rise to rights at all): the court order not to trespass, etc, is directed not at the world but at a specific individual.28 25 In this and other cases where courts create new rights the claimant might have a ‘right’ to the relevant court order in the sense that if he is denied that order he may be able to convince a higher court that he has a right to the order. The point is that the duty to pay the sum of money awarded in a punitive award does not exist prior to the order. If the sum is paid voluntarily, prior to judgment, it will not accomplish the punitive and symbolic purposes that are the mark of punitive damages. 26 The qualifier ‘in such cases’ is necessary because the term ‘injunction’ is sometimes applied to other orders. For example, an order to perform a negative contractual obligation, though in substance specific performance, is usually described as an injunction. In this essay, ‘injunction’ refers exclusively to an order that is granted to protect a property right. 27 See eg Attorney General for Canada v Ritchie Contracting and Supply Co Ltd [1919] AC 999, 1005 (PC). 28 It appears that the only orders to do or not do that are directed at everyone (and which therefore enforce in rem rights directly) are orders for the recovery of land (formerly ‘ejectment’). The order to quit the land is directed not just at the defendants but at anyone on the property: see eg McPhail v Persons, Names Unknown [1973] 3 WLR 71 (CA). Of course, declaratory orders frequently proclaim property rights, eg where the court declares the existence of a constructive trust.

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But the original substantive rights against trespasses, nuisances, and so forth on which claimants rely when they seek injunctive relief are property rights. Like other in rem rights, they are rights against the world: my right not to suffer a nuisance is a right that I hold against everyone. This apparent transformation of an in rem right into an in personam right distinguishes injunctions from specific performance.29 There are three ways of understanding the relationship between an injunctive order and the claimant’s substantive rights. Perhaps the simplest interpretation supposes that so-called in rem rights are in reality bundles of in personam rights.30 In this view, to say that I have a right, valid against everyone, to exclusive possession of my property is just to say that every person in the world has an obligation, owed to me personally, not to interfere with my possession. It follows on this view that an injunction not to trespass, etc, does no more than (merely) confirm one of these personal rights. The idea that property rights are bundles of personal rights has few supporters today.31 But for present purposes it is sufficient to observe that if this view is adopted it follows that proof of a wrong (or imminent wrong) is straightforwardly part of the cause of action for an injunction. On the ‘property-rights-as-personal rights’ view, injunctions and orders of specific performance are indeed identical. In each case, the court will only make an order if it has proof of an actual or imminent infringement of the very right that the claimant is requesting the court to enforce. The second explanation of injunctions supposes that they transform, at the moment of judgment, the claimant’s in rem right (against everyone) into an in personam right against the defendant.32 In this view, injunctive orders give rise to rights that did not exist prior to the judgment. Prior to the judgment, the defendant’s obligation not to trespass was just one aspect of an undifferentiated obligation imposed on everyone in the world not to trespass on the claimant’s property. Subsequent to the judgment, and because of the judgment, the defendant has a new personal obligation, owed specifically to the claimant, not to trespass on his property. In this view, injunctions are similar to other rights-creating orders, for example orders to pay punitive damages. Like the parallel case in which a court order appears to transform a personal obligation into a property right (for example, where a court declares a constructive trust in order to, ostensibly, reverse an unjust enrichment), the idea that court orders can transform property rights into 29 See generally R Grantham and C Rickett, ‘Property Rights as a Legally Significant Event’ (2003) 62 Cambridge Law Journal 717. 30 W Hohfeld, ‘Fundamental Legal Conceptions’ (1917) 26 Yale Law Journal 710. 31 See eg JE Penner, ‘The “Bundle of Rights” Picture of Property’ (1996) 43 UCLA Law Review 711, 726–731. 32 This appears to be the position of Grantham and Rickett, n 29 above.

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personal rights raises complex issues. But for the purposes of this essay it is sufficient to observe that if this second interpretation of injunctions is adopted, then proof of an actual or imminent wrong is again clearly part of the cause of action for an injunction. The transformative order that this view supposes courts make when they order injunctions are only made on proof of the actual or imminent infringement of the claimant’s in rem right. The third possible interpretation of injunctions is the most interesting from the perspective of this essay’s concerns. Like the first interpretation, this interpretation regards injunctions as confirming already-existing duties. The difference is that this interpretation supposes that the duties confirmed are secondary duties. Specifically, the third view supposes that the infringement of an in rem right (for example, a right to exclusive possession of land) gives rise at that moment and prior to going to court to a different in personam duty (for example, a duty owed by the wrongdoer to the landowner to not trespass). It is this already-existing, but secondary, in personam duty that an injunction then confirms. This third interpretation is mentioned, though not explicitly adopted, in a number of Birks’s essays.33 It sounds somewhat odd to say that a defendant’s personal duty to the plaintiff not to cross over the plaintiff’s land arises from the act of having done just that, that is, having crossed over the plaintiff’s land. But in formal terms, this interpretation of injunctions is identical to the standard interpretation of damages. An order to pay compensatory damages is conventionally (and rightly) assumed to confirm an already-existing secondary duty to pay damages. Damages orders are effectively mandatory injunctions of a secondary duty to pay compensation. The secondary duty arises at the moment of the committing of the wrong. The only difference between damages and injunctions, on this third view, is the content of the secondary duty that the court order confirms. For this reason, it is convenient to discuss injunctions (thus interpreted) as part of the discussion of damages orders.

V

O RD E RS TO PAY DAM AG E S

The cause of action for orders to pay damages and other orders that confirm secondary duties (such as injunctions on the above interpretation) clearly includes proof that the defendant committed a wrong. By definition, secondary duties arise from wrongs. But this feature of damages orders 33 Birks, n 1 above, 6; Birks, n 13 above, 40; Birks, n 19 above, 11. Birks appears to support this interpretation when he states, in a discussion of responses to wrongs, that ‘The victim can usually get an injunction to put an end to a continuing wrong, or indeed to one that is anticipated’: Birks, n 1 above, 6.

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does not show that they are remedial in the specific sense that is the concern of this essay. The position defended in this essay is not that all court orders are remedial in terms of their content (clearly some are not), but rather that all court orders are remedial in terms of the reason for making the order. Thus, in the case of specific performance, the defendant’s wrongdoing helps to explain why the court made an order at all, but it is not part of the explanation of the order’s content. The duty that the order confirms arose from a non-wrong. In the case of damages orders, proof of the wrong that gave rise to the secondary duty to pay compensation plays a different role. The wrong explains the content of the duty (the duty to compensate arises from the wrong), but it has no role in explaining why the court made the order at all. From the perspective of explaining why and when courts will confirm substantive duties, the distinction between duties that arise from wrongs and duties that arise from non-wrongs is unimportant: they are each simply duties that arise from events. It follows that to determine if damages (and other secondary-dutyconfirming orders) are remedial in the same sense that specific performance is remedial we need to ask whether the claimant must prove a wrong in addition to the wrong that gave rise to the secondary duty to pay compensation. Specifically, we need to ask whether a failure to fulfil the secondary duty is part of the cause of action for damages. Described in this way, damage orders turn out to be identical, for the purposes of this essay, to orders to make restitution of an unjust enrichment. An order to make restitution,34 according to the conventional understanding,35 is an order that confirms an already-existing duty. That duty arises, as Birks says, because of a non-wrongful event (for example, the receipt of a mistaken payment). But from the perspective of understanding the relationship between substantive rights and court orders, it is identical to a duty to pay damages or other secondary duties. In each case, the court is asked to confirm a substantive duty. Of course, specific performance orders (and orders to pay debts) also confirm substantive duties. But the substantive duties that specific performance orders confirm are different in an important respect from the substantive duties that orders to make restitution, pay compensation or perform other secondary duties confirm. By definition, a contractual duty is not due until a date after its creation. This is why it is possible for courts to order specific performance before the defendant has breached his duty and why it is significant that they do this only exceptionally. In contrast, 34 ‘Orders to make restitution’ here refers exclusively to orders to make restitution where the ground for restitution is that the defendant was unjustly enriched at the claimant’s expense. Orders to make restitution ‘for wrongs’ raise different issues. 35 Alternative analyses are possible (see, eg S Smith, ‘The Structure of Unjust Enrichment Law: Is Restitution a Right or a Remedy?’ (2003) 36 Loyola of Los Angeles Law Review 1037), but the conventional account, which Birks has always defended, provides the strongest grounds for Birks’s view.

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duties to make restitution, to pay compensation and to perform other secondary duties are due at the moment they are created. The duty to pay damages arises from the moment of injury. It follows that ‘anticipatory’ orders of the kind that are theoretically possible in the case of contractual obligations are not possible in the case of non-contractual obligations. By definition, the defendant will have breached a duty prior to the court order because the defendant has not paid the damages, made restitution, etc. Of course, such breaches do not give rise to separate duties to compensate (or other secondary duties) or, if they do, they give rise to duties that the courts will not enforce.36 But there are many legal duties courts refuse to enforce.37 Courts will not enforce contractual duties that have a personal element—for example, a contractual duty to work as an employee. Nor, exceptional cases aside,38 will common law courts, enforce ordinary in rem duties: the common law has no vindicatio. In any event, it follows as a matter of logic that if a legal duty is due and has not been fulfilled, then the duty has been breached and a legal wrong has occurred. Whether the courts choose to recognise a further duty arising from that wrong and whether they then choose to enforce that duty directly are different questions.

VI

ORDERS TO MAKE RESTITUTION

A court order to make restitution, like a court order to pay damages or (on the third interpretation) to not commit a nuisance, etc, confirms a duty that has been breached at the time of the order. If the court is willing to make the order, the defendant is, by definition, a wrongdoer in legal terms. This feature of non-contractual court orders is consistent both with the view that regards all courts orders as remedial and with the view that denies this. That these court orders are only made when a breach has occurred may be thought to show that proof of a wrong is part of their cause of action. 36 Formally, it is not possible to bring an action for damages for failure to pay damages or for failing to make restitution. In practice, the sums that courts award as damages or restitution are arguably equivalent to those that would be awarded if such actions were possible. As a general rule, the ‘loss’ that naturally and foreseeably arises from the non-payment of money is equal to the ‘value of money’, that is, the relevant sum times the prevailing interest rate. Thus, the practice of awarding interest could be regarded as a way of awarding damages for failure to pay. Alternatively, the practice of awarding interest explains why damages for failure to pay damages or restitution are not formally available: they would merely duplicate the existing awards: see Smith, ibid. 37 Birks acknowledges this in n 19 above, 11–12, but in n 9 above, 37, he suggests such cases must be very rare:

the facts which constitute the breach of a legal duty will almost always, though not of absolute necessity, generate a new and different obligation. 38 The exception is an order for recovery of land (ejectment): see McPhail v Persons, Names Unknown [1973] 3 WLR 71 (CA) .

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Equally, that these orders are only made when a breach has occurred may be thought to show nothing more than that courts make such orders when, and because, the relevant duty exists. According to this second—and Birksian—view, the fact that the duty has been breached is irrelevant; all that matters is that there is a live duty. Each of these conclusions is consistent with the practice of the courts. If courts could make non-contractual orders in situations where the defendant was under a substantive non-contractual duty but had not yet committed any wrong, we could determine if proof of a wrong was part of the cause of action. But courts cannot make such orders, even if they wanted to, because the facts that give rise to the substantive duty give rise, at the same moment, to its breach. Occam’s razor—the principle that, all things being equal, the simpler solution is preferable—weighs in favour of the explanation, adopted by Birks, that regards proof of the wrong as irrelevant. According to this explanation, the reason a court orders damages, restitution, etc is simply that the defendant is under an obligation to pay damages, restitution, etc.39 Nothing more needs to be proven. But simplicity is not the only virtue when explaining the law. More fundamental than simplicity is the imperative that an explanation should make sense of the law—that it should render the law intelligible—so far as this is possible.40 From this perspective, the explanation that supposes that proof of a wrong is part of the cause of action for non-contractual orders is more compelling. The wrong-based explanation of the cause of action for non-contractual orders is consistent with the explanation of the cause of action for contractual orders (including orders to pay a debt). We have seen that to obtain a contractual order a claimant must prove an actual or anticipated wrong. There is no reason why the law dealing with non-contractual orders should be different. More importantly, the wrong-based account reveals the law on non-contractual orders to be consistent with long-established moral and political principles. It has already been noted that court orders are qualitatively different from ordinary rights-creating events (if, indeed, they give rise to rights at all), such as entering a contract or receiving a mistaken payment. Court orders are not events that just happen in the world. A court order is a command by an official of the state that the defendant perform a specified act. If the order is not fulfilled, the defendant is liable to imprisonment or seizure of property without further recourse. Such an order, like other coercive acts of the state, should not, exceptional circumstances aside, be made unless the subject has done something wrong or is about to do something wrong. A court order that is made merely because 39 40

Birks was arguably influenced by this consideration: Birks, n 1, 22, 48–9. See S Smith, Contract Theory (Oxford, Oxford University Press, 2004) 5.

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the defendant is under an existing duty, without proof of any wrongdoing, is a pre-emptive strike against liberty. Where a wrong is imminent and cannot otherwise be prevented, pre-emptive strikes of this kind may, exceptionally, be justified; but, in general, it is inconsistent with the principle of individual liberty for courts to order an individual to do or not do something where that individual has neither done anything wrong nor is about to do something wrong. That pre-emptive strikes should only be allowed in exceptional circumstances is clearly recognised in the case of contractual duties. It would be absurdly high-handed if the state were able to order me, on pain of imprisonment or seizure of property, to perform a contract without evidence that I was unwilling to perform voluntarily. The conclusion must be the same in cases where the duty is to make restitution, pay damages, etc. The only reason this is not immediately evident as a matter of law is that, as we have seen, proof of the wrong is automatic. It is not necessary to ‘prove’ non-performance in such cases, although proof that performance has happened will certainly preclude the court from making the order.

VI I

CO N C L U S I O N : C O U RT O R D E RS AS RE M E D I E S

The main argument of this essay is that to understand court orders it is necessary to distinguish clearly between their content and their existence. The reasons that justify the content of a court order are different from the reasons that justify making an order at all. To adopt Birks’s terminology, the events that give rise to the duties that court orders confirm are different from the events that give rise to the order itself. In terms of their content, many court orders merely confirm duties that arise from non-wrongs, such as making a contract or receiving a mistaken payment. The content of such orders is not a response to a wrong, and so in this respect it is correct to say, as Birks does, that such orders are not remedial. But in terms of the reasons for making a court order, an examination of the most important categories of court orders shows that a court order will not be made except on proof of an actual or imminent wrong. In this respect, it is correct to say, with Blackstone, that court orders are remedial, even when the duties they enforce arise from a non-wrong. It is pleasing to show that the apparently opposing views held by Blackstone and Birks can be reconciled on the basis that they refer to different aspects of court orders. At the same time, it must be acknowledged that Blackstone’s terminology is more illuminating. It has already been noted that describing court orders as just one of many events that give rise to rights is liable to mislead. Even if court orders are rightsproducing events, both they and the rights to which they give rise are qualitatively different from other events and rights. More importantly,

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describing court orders as remedies focuses attention on their most important feature. Birks’s observation that the content of many court orders merely replicates the content of ‘non-remedial’ primary rights is fundamentally a statement about substantive rights. In his discussion of remedies, Birks’s main target is the view that the substantive rights that the courts enforce are always secondary rights, born from wrongs. The most important conclusion of Birks’s Blackstone Lecture is not that some court orders replicate non-remedial substantive rights, but that some substantive rights are non-remedial. By contrast, the observation that court orders are only made in response to an actual or anticipated wrong is fundamentally a proposition about the nature of court orders. It focuses on the most important feature of court orders, which is that they are made at all. What needs to be explained about court orders is not, fundamentally, the content of the substantive rights that they (typically) confirm, but rather the court’s use of its coercive powers to back up those substantive rights. From this perspective, the observation that court orders, regardless of their content, are only made on proof of an actual or anticipated wrong is crucially important. The label ‘remedy’ draws attention to this feature of court orders. Birks, more than anyone else, understood the importance of proper labels.

21 Remedy as Right REMEDY AS RI GHT

MICHAEL TILBURY * MI CHAEL TI LBURY

I

I NTRO DUCTION

W

HILE P ETER BIR K S ’S view of the nature and function of ‘remedy’ in private law is scattered throughout the body of his scholarship, it appears in its most complete form in his Blackstone Lecture in 1999.1 The stated aim of that Lecture is to argue for nothing less than the purging of ‘remedy’ from the analytical vocabulary of the law. Birks realised this argument in his subsequent book on the law of unjust enrichment.2 That work indicates, however, that he may have been prepared to qualify the argument he put in the Blackstone Lecture, but perhaps to an insignificant extent.3 The essence of the argument in the Blackstone Lecture is that legal usage appeals to ‘remedy’ in a variety of senses, commonly to describe the law’s response to the events that trigger liability. Such responses are also ‘rights’, and Birks would have us refer to them as such. To style them ‘remedies’ suggests that the law responds only to events that are ‘wrongs’, whereas the liability of a defendant can also arise from events that do not involve a wrong, a category that Birks styles ‘not-wrongs’. To regard remedies as arising only from wrongs threatens the established taxonomy of events from which rights arise. Moreover, ‘remedy’ (as opposed to ‘right’) can imply that courts have a strong discretion in determining responses to liability. Birks styles the view of private law that interposes the strong discretion of a court into the determination, or realisation, of legal rights as ‘discretionary remedialism’. He criticises this view as ultimately destructive of the rule of law. A particular theme, associated more generally with Birks’s scholarship, runs through the Blackstone * Commissioner, New South Wales Law Reform Commission; Professorial Fellow, the University of Melbourne; Adjunct Professor of Law, University of Technology, Sydney. 1 P Birks, ‘Rights, Wrongs, and Remedies’ (2000) 20 Oxford Journal of Legal Studies 1. 2 P Birks, Unjust Enrichment (Oxford, Clarendon Press, 2nd edn,2005) pt IV. 3 Ibid, 166 (suggesting that the order of the court or its execution has some claim to the word).

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Lecture: its ‘undefended premise’ that taxonomy is of fundamental importance to the understanding and development of the law.4 This essay examines the thesis of Birks’s Blackstone Lecture. It argues, against the thesis, that the Lecture itself points to a certain core meaning of ‘remedy’ as the rights generated by causes of action, whether wrongs or not-wrongs. It also argues that this understanding of remedy does not undermine the established classification of events from which rights arise, and that replacing ‘remedy’ by ‘right’ will not assist in obviating any distortion of the categories of wrongs and not-wrongs or in avoiding discretionary remedialism. Rather, a basal problem lies in Birks’s attempted reification of the categories of ‘wrong’ and ‘not-wrong’. This not only produces distorting consequences for the law, but itself opens the door to discretionary remedialism. Moreover, the distinction between wrongs and not-wrongs fails to engage, in any meaningful way, the discretion inherent in judicial decision-making, whether at the level of liability or of remedy.5 As part of a useful taxonomy of the legal system, it simply seems irrelevant. This essay makes four assumptions. The first is that a classification of private law by reference to the causative events that generate rights is worthwhile and important. While this represents the dominant approach to taxonomy in Western systems of law, it does not imply that other classifications are impossible or inferior.6 Secondly, remedies are not themselves causative events, but responses to those events.7 Thirdly, such responses are ‘rights’ in the sense of claims, asserted or realised, that identify another person as being under a duty to respect them (that is, the right or claim). Fourthly, these rights themselves are either primary (sometimes styled ‘superstructural’) or secondary: primary where their existence is not dependent on the breach of some other right; secondary where they respond to the breach of another right that amounts to a wrong.8 Implicit in the last two points is that the contrast between ‘remedy’ and ‘right’, manifest in the old but meaningless maxim that ‘where there is a right there is a remedy’, is not to be taken seriously. It should be noted that nowhere in the Blackstone Lecture does Birks himself identify the sense in which he uses ‘right’, a word whose many shades of meaning are

Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 3. This does not abrogate the rule of law: see, eg E Thomas, The Judicial Process: Realism, Pragmatism, Practical Reasoning and Principles (Cambridge, Cambridge University Press, 2005) 225–31. 6 See especially G Samuel, ‘English Private Law: Old and New Thinking in the Taxonomy Debate’ (2004) 24 Oxford Journal of Legal Studies 335. 7 See Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 3. 8 J Austin, Lectures on Jurisprudence (London, John Murray, 5th (Campbell) edn, 1885) Lectures 45–9. See P Birks, ‘Obligations: One Tier or Two?’ in P Stein and A Lewis, Studies in Justinian’s Institutes in Memory of J A C Thomas (London, Sweet & Maxwell, 1983) 18. 4 5

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notorious.9 It seems fairly clear, however, that he intends to use the word as defined here.

II

R E M E DY’ S M E A N I N G

Two points are clear about the use of ‘remedy’ in law. The first is that in all areas of law the word is frequently and widely employed, often with no pretence to scientific precision, to refer to the law’s response to a defendant’s liability. This reflects the ordinary meaning of the word, as well as its etymology, as something that ‘cures’ a condition or situation.10 Secondly, and in stark contrast, certain nominate forms of response are generally recognised without difficulty as remedies in private law. These include damages,11 injunctions and specific performance. Beyond the general indeterminacy of the first and the specificity of the second, any further elaboration of the meaning of the word in its legal context is likely to be derived from a general consciousness of its use in judgments, texts and other legal sources. As such, the elaboration will purport to be derived from the ordinary language of lawyers. Yet, in the absence of an empirical investigation of relevant legal sources—and, no doubt, even then—assertions that a particular meaning represents the natural language of lawyers must remain inherently contestable. Fortunately, there is sufficient agreement between Birks and other scholars12 about the various shades of meaning that the word has come to bear in the jurisprudence of the common law to enable us to take, as a starting point, the five meanings of ‘remedy’ on which Birks eventually settled.13 They are: 1. ‘remedy’ as an action, cause of action or the law’s configuration of the actionability of the claimant’s story; 2. ‘remedy’ as a right born of a wrong; 3. ‘remedy’ as a right born of a grievance or injustice; 4. ‘remedy’ as a right born of the order or judgment of a court; and 5. ‘remedy’ as a right born of a court’s order issued on a discretionary basis.14 9 Especially W Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning (London, Yale University Press, 1919). 10 Especially R Zakrzewski, Remedies Reclassified (Oxford, Oxford University Press, 2005) 8–11. Consider also its meaning as the ‘actual act, thing, or occurrence that effects or amounts to the redress or relief that the claimant obtains’: ibid, 21. 11 But Zakrzewski, ibid, 50–1 would exclude most aspects of damages from the law of remedies on the basis that damages belong to the substantive law of secondary rights and are only relevant to remedies as an example of court orders that replicate secondary rights. 12 Especially Zakrzewski, ibid, ch 2. 13 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 9 (where Birks tells us that his list of the meanings of remedy fluctuated between five and eight). 14 Ibid, 10–16.

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At its widest, the first identified meaning of ‘remedy’ falls foul of the second assumption on which this essay is based, that remedy belongs to the ‘response side’ of liability, rather than the ‘events side’. An illustration of this first meaning is this advice by a lawyer to his client after listening to the client’s complaint of a particular factual situation: ‘your remedy is a constructive trust’. Without more, ‘remedy’ is here capable of referring to the facts on which the defendant is liable to the claimant; to the legal conceptualisation of those facts; and/or to the order that may be made by the court. That this usage creates serious ambiguity for purposes of legal analysis is uncontroversial. It explains why most writers on the law of remedies find it necessary to distinguish their chosen subject from those legal subjects that describe the basis of the claimant’s liability in tort, contract or unjust enrichment.15 The only interest of the first identified meaning is that it can refer, at various points, to some legal conceptualisation of the plaintiff’s rights. At the highest level of abstraction, reference can be to the events that generate those rights. At this level, the accepted taxonomy, originating in a classification by the Roman jurist Gaius,16 is that rights arise from consent, wrongs, unjust enrichments or other miscellaneous events17 (the ‘Gaian classification’).18 For example, a constructive trust (in the wide first meaning) may arise from an unjust enrichment, a wrong or some other causative event. Within the categories revealed at this high level of conceptualisation, but at a lower level of abstraction, lie specific ‘causes of action’, such as the action for the price of goods in contract or for conversion in tort. The meaning of ‘cause of action’ varies, often subtly, with context.19 The most generally accurate description of the phrase is that it envisages ‘simply a factual situation the existence of which entitles one person to obtain from See Zakrzewski, n 10 above, ch 3. Gaius nowhere expressly includes ‘unjust enrichment’ in the classification. In his Institutes, he classified all obligations as arising from contract or tort (G 3.88), but with the later qualification that the defendant sometimes comes under a real obligation (G 3.91). The addition of ‘other events’ to the categories of contract and tort is attributed to him in Digest 44.7.1. 17 As the fourth category is content free, it can, by simple assertion, save any taxonomy based on classification of rights by causative events. Consider P Birks, ‘Introduction’ in P Birks (ed), English Private Law, vol 1 (Oxford, Oxford University Press, 2000) xxxv, xlii (no separate chapter for the category). 18 See P Birks and G McLeod, Justinian’s Institutes (London, Duckworth, 1987) 16–26. 19 Hughes v Australian Blue Metal Ltd [1964–5] NSWR 938, 944–7 (NSWSC). Eg it means ‘a new case’ in the context of an application for extension of time under a statute of limitations: see B Cairns, Australian Civil Procedure (Pyremont, NSW, Lawbook Co, 7th edn, 2007) 221–3. The possible meanings of the phrase are usefully discussed in the vigorous debate that emerged to pin down its meaning following the abolition of the forms of action in United States jurisdictions: see C Clarke, ‘The Code Cause of Action’ (1925) 34 Yale Law Journal 614; S Harris, ‘What is a Cause of Action?’ (1928) 16 California Law Review 459; B Gavit, ‘A “Pragmatic Definition” of the “Cause of Action”’ (1933) 82 University of Pennsylvania Law Review 129, and the body of literature cited in these articles. 15 16

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the court a remedy against another person’.20 More specifically, it can denominate the aggregate of facts that give rise to a right to sue,21 a usage common in identifying, for pleading and other procedural purposes, the facts that must be extracted from the plaintiff’s complaint in order to bring that complaint within a cause of action that is sufficient to trigger a legal response. But when the focus of the phrase shifts to identify, in the abstract, the generalised elements of the cause of action within which the facts must fall, it is more accurate to refer to a cause of action as ‘the essential ingredients in the title to the right which it is proposed to enforce’.22 This description makes it clear that the phrase invariably contains reference to legal concepts (for example, ‘want of care’ and ‘damage’ in negligence).23 To describe ‘cause of action’ in any of these senses as a ‘remedy’ shares the failure of the first identified meaning of remedy to differentiate the basis of the defendant’s liability from the law’s response to it. There would, however, seem no prima facie reason why the response itself to the cause of action should not be styled ‘remedy’. In an action for the price of goods, the plaintiff’s ‘remedy’ is to claim that price pursuant to a term of the contract. Similarly, plaintiffs whose goods have been converted have as their remedy a claim for the return of those goods or the value of those goods. The difference between these two claims is only that, in the action for conversion of goods, the claimant’s remedy responds to a cause of action that is categorised as a ‘wrong’, and thus falls within Birks’s second meaning of ‘remedy’. In contrast, in the action for the price of goods there is no need to categorise the cause of action as a ‘wrong’: contract itself generates the defendant’s potential liability, and the making of a contract is, obviously, not a ‘wrong’. The defendant’s liability arises from a ‘not-wrong’, or, in Kit Barker’s terminology, from a ‘primary injustice’.24 However described, this is Birks’s third meaning of ‘remedy’. Birks’s second and third meanings of remedy, therefore, have unity beyond ‘response’ (which has no technical connotation in law that could survive for analytical purposes). They refer to rights that are generated by a cause of action. It would, therefore, be possible to define remedy as a ‘right born of a cause of action’, a definition that would imbue the word with a fairly certain meaning. In Attorney-General v Blake, Lord Nicholls did just that. He said that ‘remedy’ means ‘the law’s response to a wrong Letang v Cooper [1965] 1 QB 232, 242–3 (CA, per Diplock LJ). Especially Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234, 245 (HCA, per Wilson J); Read v Brown (1889) 22 QBD 128, 131 (CA). In accord: Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 23. 22 See William v Milotin (1957) 97 CLR 465, 474 (HCA, per Dixon CJ, McTiernan, Williams, Webb and Kitto JJ). 23 Ibid; Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234, 245 (HCA). 24 K Barker, ‘Rescuing Remedialism in Unjust Enrichment Law: Why Remedies are Right’ [1998] CLJ 301, 319. 20 21

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(or, more precisely, to a cause of action)’.25 Justice Gaudron made the same point, in different words, in Australian Broadcasting Commission v Lenah Game Meats: Because [an injunction] is a remedy, it is axiomatic that it can only issue to protect an equitable or legal right or, which is often the same thing, to prevent an equitable or legal wrong.26

Birks’s fourth meaning of remedy, however, throws immediate doubt on the possibility of defining the word in terms of the rights generated by a cause of action insofar as the definition fails to include reference to the order of the court. Since the fourth meaning is hallowed by Blackstone,27 and recently resurrected by Dr Rafal Zakrzewski,28 this may be a serious omission. A consideration of the category must start from the understanding that a cause of action merges in the judgment of a court,29 and that it is, consequently, the rights flowing from the judgment that are relevant for the purposes of execution.30 However, rights born of a cause of action are not generally dependent on the judgment of a court. They arise when the facts that generate the cause of action occur, and thus predate any judgment, which merely confirms them.31 Indeed, the rights exist independently of any judgment. The plaintiff’s right to damages is no less such when it is reached as a result of a settlement between the parties rather than by an order of the court. And the plaintiff’s right to specific performance is no less such because the defendant’s voluntary performance realises it rather than a court order. Sometimes, however, a court order may be the source of the plaintiff’s rights, particularly where those rights are created by statute. To the extent to which such orders are the source of the plaintiff’s rights at general law, they form a small and controversial group32 whose existence does not deny that, generally, a court order is not an essential part of the description of the rights born of causes of action. Of course, it is possible to argue that the meaning of remedy ought to be linked to court orders because to do so serves some purpose in terms of legal analysis. The initial problem that such a suggestion is likely to meet is, I suggest, that it imposes a meaning on ‘remedy’ that, notwithstanding the centuries-old influence of Blackstone, does not accord with the natural [2001] 1 AC 268, 284 (HL). (2001) 208 CLR 199, [60] (HCA). Especially Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 4–6, 15–16, 25–7. Zakrzewski, n 10 above, passim. Transit in rem judicatam: see K Handley, Spencer Bower, Turner and Handley: The Doctrine of Res Judicata (London, Butterworths, 3rd edn, 1996) pt 2. 30 In the taxonomy of obligations, Birks would include these rights in the miscellaneous category: P Birks, ‘The Concept of a Civil Wrong’ in D Owen (ed), Philosophical Foundations of Tort Law (Oxford, Clarendon Press, 1995) 31, 49–50. 31 Eg Fortex Group v MacIntosh [1998] 3 NZLR 171, 172–3 (NZCA) (distinguishing between institutional and remedial constructive trusts). 32 See Zakrzewski, n 10 above, ch 13. 25 26 27 28 29

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usage of lawyers, who do not so restrict the meaning of the word. Zakrzewski’s recent work is an illustration.33 He points out that legal writing often refers to court orders as remedies.34 However, such references are, arguably, driven mostly by context (for example, the context of specific performance), and do not establish that their authors regard the existence of a court order as essential to an understanding of remedy in law. More tellingly, Zakrzewski’s analysis leads to the view that, contrary to the natural language of lawyers, specific performance and injunctions are included in remedies, but not the substance of the law of damages.35 Of course, it may sometimes be necessary for analytical purposes to impose a meaning on a word that it does not have in ordinary speech or in the normal speech of lawyers, but there must surely be a reason for doing so. Zakrzewski finds that reason only in the ‘stable’ meaning for remedy that he creates.36 But it is difficult to accept that meaning without being sure that it yields a coherent law of court orders and, if it does, how court orders fit in a classification of rights by causative events. In short, no convincing reason is ultimately offered for Zakrzewski’s meaning of ‘remedy’, especially as it generates an unusual view of the law of remedies that excises it from the ‘substantive law’ by appealing to taxonomical principles of doubtful application to law.37 If the usage of remedy as the right born of the order or judgment of a court cannot be sustained, then Birks’s identified fifth sense of remedy also falls away. That sense merely puts an additional ingredient into the fourth sense of remedy: that the order of the court be issued on a discretionary basis. It is clear that lawyers do not normally use the word in this sense. Rather, this sense of the word originates in the academy, where it is the preserve of a debate about the role of discretion in the relationship between event and response.38 Birks isolates the fifth meaning for the purposes of the Blackstone Lecture simply to point out the dangers of discretionary remedialism, which, he acknowledges, is a ‘programme for the future’.39 This leaves us with the meaning of remedy as the right born of a cause of action, that is, remedy in the second and third senses identified by Birks. The focus of the Blackstone Lecture is on these meanings, since they Ibid, passim. Ibid, 17, 44. Ibid, ch 10, cf ch 8. Ibid, chs 2, 4. ‘Stability’ cannot itself make out a claim for new meaning. The necessity for new meaning must be found in the way in which current understandings impede our perception of ‘reality’ or ‘truth’ and in what the new meaning does: consider generally J Austin, How to do Things with Words (Oxford, Oxford University Press, 2nd paperback edn, 1976). 37 Zakrzewski, n 10 above, ch 5. 38 The so-called monist versus dualist debate: see M Tilbury, ‘Remedies and the Classification of Obligations’ in A Robertson (ed), The Law of Obligations: Connections and Boundaries (London, UCL Press, 2004) 12, 17–27. 39 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 24. 33 34 35 36

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highlight the importance of drawing the line between wrongs and not-wrongs. I suggest, however, that there may be another reason why it is these two meanings that form the core of Birks’s lecture. Quite simply, it is in the sense of ‘right born of a cause of action’ that lawyers most commonly use the word ‘remedy’, and thus where the stability of the term is likely to be found for analytical purposes. This is no more than a formal argument. Its verification requires an analysis of the whole law of remedies, covering responses to wrongs and to not-wrongs, that demonstrates the cohesiveness of the subject in normatively significant ways. Barker’s work on the role of remedy in unjust enrichment hints at this cohesiveness, at least as between remedies in unjust enrichment and remedies for wrongs.40 A natural and stable meaning for remedy may emerge, then, from a definition of the word as a right born of a cause of action. Whether it does or does not, Birks makes the important point that the current uncertainty surrounding the word ‘remedy’ does not of itself dictate a preference for ‘right’ over ‘remedy’.41 That preference is found in combination with other factors, of which the principal are42: • The sabotage of the classification of rights by causative events to which the language of remedy gives rise; • The distortion that the language of remedies produces for the category of not-wrongs; and • The danger that the language of remedies will promote discretionary remedialism.

III

SAB OTAG I N G G A I U S

The essence of Birks’s argument is that the language of remedy demolishes the Gaian classification of obligations by deleting from it the category of ‘wrongs’. Unless a right (rather than a remedy) arises from a wrong, it is simply not within the Gaian classification, and the classification cannot be saved by using the language of remedy in the other categories.43 This 40 Barker, n 24 above, esp 303–10; K Barker, ‘Riddles, Remedies, and Restitution: Quantifying Gain in Unjust Enrichment Law’ (2001) 54 Current Legal Problems 255. My own attempt at this is now dated and, perhaps, overinclusive: see M Tilbury, Civil Remedies: Principles of Civil Remedies vol 1 (Sydney, Butterworths, 1990) esp ch 4. 41 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 19. Cf Zakrzewski, n 10 above, chs 2, 4, 5. 42 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 19–25. I have not dealt with ‘multiple causes of action’ because of its particularity and because the replacement of ‘remedy’ by ‘right’ in the context of multiple causes of action adds nothing to the problems presented in such cases. The question, of whether the rights are alternative or not, still has to be resolved on substantive grounds: see Tilbury, n 40 above, [2009]–[2027]. 43 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 21.

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argument puts a premium on the importance of the meaning of the words themselves. It assumes that ‘remedy’ does not import ‘right’, and that ‘right’ is exclusive of ‘remedy’. As a matter of language, neither assumption seems justified. The first because, as we have seen, the proposition that remedy is a right can be taken for granted44; indeed, in Birks’s enumeration of the meanings of remedy, he accepted that it is the equivalent of ‘right’ in three of those meanings. To this extent, then, the argument is no more than that the many meanings of remedy can cause confusion, an argument that Birks has already acknowledged does not support its replacement by ‘right’. The second assumption, that ‘remedy’ cannot substitute for ‘right’ where the cause of action is not a wrong, is again surely questionable as a matter of language. Is not a plaintiff’s claim on the contract for the price of the goods easily described as the plaintiff’s ‘remedy’, especially since (as will usually be the case) the defendant’s failure to pay will amount to a breach of contract, even though that is not part of the plaintiff’s cause of action? Again, is not the plaintiff’s claim in unjust enrichment for a sum of money received by the defendant at his expense describable as the plaintiff’s ‘remedy’, especially in a context where the plaintiff complains about the defendant’s failure to return, or account for, the money to the plaintiff?45 And is not the plaintiff’s power to rescind a contract commonly described as the plaintiff’s remedy?46 Birks intended this point to move beyond a critique based on language, but exactly how is difficult to pin down. At this point of his Blackstone Lecture,47 Birks criticises Andrew Burrows’s description, in the introduction to his book on remedies, of the symmetry behind claims in tort and breach of contract.48 Burrows’s description is designed to locate remedies in contract and tort claims, and hence to assist in delimiting the scope of his book. Burrows points out that a contractual obligation originates in an exchange of promises that puts the promisor under an obligation to perform the promise, and that, if the promisor fails to do so, the promisee has an action for breach of contract. On the other hand, a tortious obligation is one not to wrong another by conduct that the different torts specify as wrongful. If a defendant breaches this obligation, he or she has a cause of action against the wrongdoer. Birks’s objection to this is that the contractual right arises from the contract, but the tortious right arises not from the tort—meaning (I assume) the tort as an event—but from a ‘tortious See pt I of this essay. See P Birks, Unjust Enrichment (Oxford, Oxford University Press, 2nd edn, 2005) 165. Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 14. 47 Ibid, 22. 48 See now A Burrows, Remedies for Torts and Breach of Contract (Oxford, Oxford University Press, 3rd edn, 2004) 4. 44 45 46

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right . . . anterior to the tort’.49 The latter refers to the rights that bind us all simply by reason of our presence in the jurisdiction. At one level, Birks’s criticism is mistaken because it fails to account for Burrows’s limitation of his exposition to breach of contract, a wrong, a point which is integral to Burrows’s purpose. That said, the essence of the criticism is that the description of the response to tort as ‘remedy’ fails to recognise that it is the tortious event that is rights-creating (by shifting that recognition onto the body of existing law), whereas this does not happen in contract, where the contractual right arises from the contract. This criticism is misplaced. Ultimately, it seems to make a distinction, impossible in this context, between the factual elements in ‘events’ and their legal categorisation. Yet when he refers to ‘wrongs’ as events that take place in the world, Birks recognises that ‘wrong’ can be used in such a way that it involves no legal conceptualisation of the events on which it is based50 or that it does.51 As with ‘cause of action’,52 this duality of meaning may be necessary. ‘Wrongs’ (torts and breaches of contracts) do occur as events in the real world, but those events create rights only in their capacity as wrongs. I am liable to you for breach of my tortious obligation simply because I have ‘wronged’ you in circumstances that give rise to liability in tort. And the reason why there is liability in tort is because rules of law say so. The same analysis could obviously be applied to breach of contract, which is a wrong.53 But is the analysis more generally true of contract? I suggest that it is. While a contract is an event in the real world, it creates rights only in its capacity as a contract. For example, there may well be a promise made by one person to another or an agreement between them, but these events create no legal rights between the parties unless they are conceptualised as ‘contract’. It is only if they are so classified that contractual rules and principles are called into play, no matter what the parties may have agreed among themselves. It could be argued that this fails to give an adequate account of the role of consent in law. This explains why modern writers, including Birks,54 tend to restate Gaius’s first category of ‘contract’ as ‘consent’. But, in itself, consent is legally neutral. The reference must be to 49 I do not read Birks’s criticism as denying that a tortious right can be anterior to the tort, as Burrows does: Burrows, ibid, 4 note 13. 50 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 5 (‘a wrong is an event which happens in the real world, and a right is the conceptualisation of a legal response to events’). 51 Ibid, 31 (‘A wrong is conduct which triggers its legal consequences in, and because of, its character as a breach of duty’). 52 See pt II of this essay. Birks also regards ‘causes of action’ as events that happen in the world: see Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 25. 53 Birks, ibid, 27. See also Birks, n 30 above, 31, 50–1 (breach of contractual duty can for the purposes of classification by causative events be added to the list of torts). 54 Eg Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 27.

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a legally enforceable consent,55 which occurs not only through contract but also through any other institution that the law regards as capable of creating rights based on consent (for example, estoppel).56 A similar analysis applies to unjust enrichment. If I am unjustly enriched because I have received by mistake, and at your expense, a payment of $100, you can claim restitution from me. The unjust enrichment is an event in the real world, but it generates rights only because the law so conceptualises the circumstances surrounding the receipt of the mistaken payment. Given the indeterminacy of unjust enrichment, it is difficult to believe that reference to the term as an ‘event’ could have any meaningful reference except in the context of the legal system from which it is derived. A classification of rights by causative events thus appeals, at least for descriptive purposes, to relevant elements of those events in the context of the legal system in which the classification operates, including necessarily the legal conceptualisation of those events.57 It could not be otherwise. While existing at a level of abstraction above particular causes of action, the Gaian taxonomy can, in common law, only be derived from such causes of action. As such, the taxonomy represents an attempted generalisation of the causes of action by reference to their causative events. These causes of action involve both wrongs and not-wrongs. Unsurprisingly, then, a taxonomy of causative events that attempts to generalise the causes of action is bound to yield a list that is not uniform in the sense of restricting itself only to events that involve wrongs or only to events that are not-wrongs. Human conduct generating events that in turn generate rights cannot, as far as we know, be classified for the purposes of creating civil liability into such a list. The list we have is simply the best we can do, or have been able to do.58 That the classification by causative events, one of the greatest achievements of Western legal science, is still useful is borne out by its continuing discussion almost two centuries after Gaius first identified it for us. The reason must be that whether an event encapsulates a legal wrong or not is an irrelevant criterion of classification by causative events, at least at this level of abstraction, and probably at lower levels. It follows that the description of responses to those events as ‘rights’ or ‘remedies’ can now be seen as irrelevant. Indeed, insofar as these responsive rights are differentiated into ‘remedies’ or ‘rights’ according to whether they respond to wrongs or not-wrongs, the descriptions could be seen as support for the

55 See P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 University of Western Australia Law Review 1, 60–4. 56 See further pt V of this essay. 57 See G Samuel, ‘English Private Law: Old and New Thinking in the Taxonomy Debate’ (2004) 24 Oxford Journal of Legal Studies 335, 339. 58 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 21.

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classification of rights by causative events. In any event, the classification is hardly sabotaged.

IV

W RO N G S , N OT- W RO N G S AN D D I S TO RT I O N

As a matter of language, ‘remedy’ is the natural response to a ‘wrong’. This carries the danger, Birks argues, that it will be thought that the law responds only to wrongs. Indeed, this was effectively the view of Blackstone and Austin, although they came to it by different routes.59 If this view were to prevail, not-wrongs would, at least where they were able to do so, metamorphose into wrongs. For example, the cause of action in unjust enrichment to recover a mistaken payment, which accrues when the defendant receives the payment, would possibly be recast as a wrong of withholding payment. Birks points out that this would be undesirable because wrongs and not-wrongs generate different responses. On the one hand, when the cause of action is a not-wrong, the court realises a primary right, a process that logically and naturally limits the responses that are available. For example, where the defendant has received a mistaken payment at the expense of the plaintiff, the only response is to require the defendant to restore the payment to the plaintiff, no more and no less. The plaintiff’s case rests on weak facts that do not justify, for example, a claim for consequential damages (such as the opportunity cost of the money that the defendant has withheld).60 On the other hand, where the defendant wrongs the plaintiff, for example, by negligently causing physical injury to the plaintiff, the remedial potential is more open-ended. Birks explains it like this61: The label ‘wrong’ operates as a licence to the law to mistreat the wrongdoer. The entitlements which the law can accord to the victim of the wrong are, so to say, at large, at least until the range has been narrowed by authority, statutory or otherwise. Re integra, those entitlements can be chosen subject only to the constraints imposed by extrinsic considerations, utility, humanity, proportionality, and so on.

With respect, the premise of this statement is truly startling.62 The notion that the rights created in response to wrongs can, even as a theoretical proposition, ‘mistreat’ the wrongdoer is to assume no immanent rationality in the civil law, such as a rationality founded in corrective justice. It creates Ibid, 25–7. See further Birks, n 55 above, 12–14, 40–2. There may be other problems with such a claim: see H McGregor, McGregor on Damages (London, Sweet & Maxwell, 17th edn, 2003) [15-013]–[15-016], [15-018]–[15-019], [15-026]–[15.030]. 61 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 33. See further Birks, n 55 above, 12–13. 62 It is a constant theme in Birks’s other writings: eg Birks, n 55 above, 12 (cutting off the wrongdoer’s ears!). 59 60

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a theoretical model of civil law that is distinctly inferior to that of the criminal law. Sentencing, the responsive side of the criminal law, is aimed at giving effect to, and synthesising, a complex body of sophisticated, interacting and often conflicting objectives and principles,63 proportionality in particular.64 These considerations are intrinsic, not extrinsic. The jurisprudence discussed in the following paragraphs of this section shows the same to be true for private law.65 Meanwhile, the assertion that any response to wrongs is theoretically possible has simply reified the categories of ‘wrong’ and ‘not-wrong’. Dangerous consequences follow both for wrongs and for not-wrongs. And Birks embraces some of them. As far as wrongs are concerned, it is necessary to bear in mind that the difference between the rights that arise from wrongs and those that arise from not-wrongs is found in the legal policy that constructs certain events as a wrongful breach of duty. That construction is made by reference to a number of factors, of which ‘fault’ is foremost, although the imposition of liability without any fault (strict liability) is possible.66 Monetary compensation is both the starting point and the almost universal response to wrongs. Since its aim is to restore the position the parties would have been in if there had been no wrong, it bears a necessary and rational relationship to liability. In Birks’s own words, ‘[t]he secondary obligation to pay compensatory damages is . . . the same thing as the right, looked at from the other end’.67 It certainly does not ‘mistreat’ the wrongdoer. In contrast, because they may bear no obvious rational relationship to the defendant’s liability, restitutionary and punitive monetary awards do have the capacity to mistreat the wrongdoer. Notwithstanding Birks’s enthusiastic support for them,68 they require a clear justification. This is why the availability of restitutionary awards in response to wrongs is such a controversial issue—as it is, for example, where the plaintiff recovers in response to the defendant’s wrong the value of a benefit that the plaintiff See especially H Hart, Punishment and Responsibility (Oxford, Clarendon Press, 1968) 1. Especially Veen v The Queen (No 2) (1988) 164 CLR 465 (HCA). Consider also, eg the need for proportionality between relief and detriment in estoppel cases: see Commonwealth of Australia v Verwayen (1990) 170 CLR 394, 413, 441–3 (HCA). 66 Especially Birks, n 30 above. In this chapter, Birks was not concerned with breach of contract, but it should be borne in mind that liability for breach of contract is a further instance of strict liability. 67 P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (Oxford, Clarendon Press, 1997) 1, 24. 68 Particularly his uncompromising condemnation of ‘the melancholy, long, withdrawing roar of Rookes v Barnard’: see P Birks, ‘The Law of Restitution at the End of an Epoch’ (1999) 28 University of Western Australia Law Review 13, 52–4. So far as the argument appeals for a rewriting of the law of damages, it seems to be doing the same thing as the supposed call of discretionary remedialists for the interposition of a discretion between not-wrongs and the responses to them, namely, the advocacy of huge expenditure of time and money to rediscover that two things are not the same after all: Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 35–6. See further M Tilbury, ‘Reconstructing Damages’ (2003) 27 Melbourne University Law Review 697, 719. 64 65 65

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would not have had in any event.69 Even more controversial is punishment of a defendant wrongdoer in exemplary damages. Awarded in civil proceedings parasitically on compensatory damages70 to punish the defendant’s ‘conscious wrongdoing in contumelious disregard of the plaintiff’s rights’,71 exemplary awards attach to wrongdoing different in kind from that which established the plaintiff’s cause of action. Yet the punishment of such wrongdoing is normally the preserve of the State. As far as not-wrongs are concerned, the danger is the other way, namely, the assumption that the response that follows the not-wrong will not ‘mistreat’ the defendant and so should be available as a matter of course. In many cases this assumption may be at least prima facie acceptable. For example, it seems generally unexceptional that a mistaken payment must be restored. However, as is common to most general rules, this is, and must be, subject to appropriate defences. For example, a defendant must be relieved of liability to the extent to which changed circumstances mean that it is no longer equitable to make restitution.72 No one takes a principled exception to defences as such. But, as is well known, responses to not-wrongs often originate in equity so that they are available, theoretically at least, only on a discretionary basis. For example, the equitable claim for the specific performance of a contract, which may found itself simply on the existence of the contract (rather than on its breach),73 may be denied in the discretion of the court. While it is possible to say, with Birks, that the bars to specific performance are weakly discretionary, operating in more or less the same way as defences to an action at law,74 this is only generally true. A decree of specific performance may be refused where its grant would cause an unconscionable hardship to the defendant that is not outweighed by the unfairness to the plaintiff of refusing to grant relief in all of the surrounding circumstances of the case (including the rights and interests of the parties and of third persons).75 69 The determination of the circumstances in which wrongs generate, or should generate, restitutionary rights is extremely complex: see, eg C Rotherham, ‘The Conceptual Structure of Restitution for Wrongs’ [2007] CLJ 172. 70 XL Petroleum (NSW) Pty Ltd v Caltex Oil (Aust) Pty Ltd (1985) 155 CLR 448, 468–9 (HCA). 71 Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71, 77; (HCA) Gray v Motor Accidents Commission (1998) 196 CLR 1, [14] (HCA). 72 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, 579–80 (HL). On defences to restitutionary claims, see P Birks Unjust Enrichment (Oxford, Oxford University Press, 2nd edn, 2005) chs 9, 10. 73 A point Birks is keen to make for the purpose of establishing the category of not-wrongs: see Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 27. However, the point needs to be approached with some reserve since (among other reasons) the defendant’s breach of contract (or, in quia timet cases, the defendant’s threatened breach) will be essential to obtaining relief: see Tilbury, n 38 above, 15–16. 74 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 16. 75 For a classic statement, see Wood v Sutcliffe (1851) 2 Sim (NS) 163, 165 (HC of Chancery). As an example, see Dowsett v Reid (1912) 15 CLR 695 .

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The factual matrix of the discretion makes its exercise in this form rare. It nonetheless exists, and, in this manifestation, it exists as a strong discretion, which would be difficult (if not impossible) to restate as a more or less discrete defence. This strong discretion ought to continue to exist. The realisation of the plaintiff’s rights through an order of specific performance has greater potential to ‘mistreat’ the defendant than an award of damages; for example, by inflicting on the defendant the hardship of having to leave her home in circumstances where it would be unconscionable for her to have to do so and where this is not outweighed by the unfairness to the plaintiff in refusing specific performance.76 It seems just that, in such cases, the plaintiff should be relegated to a claim in damages.

V

W RO N G S , N OT- W RO N G S AN D D I S C R E T I O N

One reason, Birks argues, for the abandonment of the language of remedies is that it would act as a ‘prophylactic against the rightlessness implicit in discretionary remedialism’.77 In the sense in which Birks means it, the theory of discretionary remedialism advocates, loosely, a separation of event and response; more accurately, a divorce of remedy from the determination of liability. According to the theory, having determined that the defendant is liable to the plaintiff, the court should then (and only then) assess, in the light of all the circumstances of the case, the most appropriate remedy which the plaintiff should be given.78 Birks’s objection to the theory lies in the strong discretion that it invests in the court to determine afresh in every case what that remedy should be. Remedy is no longer the plaintiff’s right, but the gift of the court. By calling ‘remedies’ ‘rights’, we reinforce the proposition that relevant events trigger rights, not discretions. It is difficult to believe that a switch to the language of rights at the response level of liability would really assist in the onslaught of a powerful theory such as discretionary remedialism, especially if we start (as I have suggested that we should79) from the understanding that remedies are, in any event, rights. The substance of the theory has to be addressed. Birks does so, in the Blackstone Lecture and elsewhere, by drawing attention to See Patel v Ali [1984] Ch 283 (HC). Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 24. See G Hammond, ‘Rethinking Remedies: The Changing Conception of the Relationship Between Legal and Equitable Remedies’ in J Berryman (ed), Remedies: Issues and Perspectives (Toronto, Carswell, 1991) ch 4; G Hammond, ‘The Place of Damages in the Scheme of Remedies’ in P Finn (ed), Essays on Damages (North Ryde, Law Book Co, 1992) ch 9; Justice E Thomas, ‘An Endorsement of a More Flexible Law of Civil Remedies’ (1999) 7 Waikato Law Review 23. There are in fact few dedicated discretionary remedialists in the sense in which Birks uses the term. 79 See pt I of this essay. 76 77 78

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the threat that the theory of discretionary remedialism poses to the finality of litigation; to the disempowerment of litigants; and to the legitimacy of judicial authority by inappropriately placing in the hands of judges the power to decide in each case what remedy is appropriate rather than what remedy the law prescribes.80 I suggest, with great respect, that the Blackstone Lecture does not, and cannot, provide a relevant base from which to launch these policy arguments. As we have seen, that base views remedies as the rights generated by not-wrongs and by wrongs. In the case of not-wrongs, which realise primary rights, the connection between event and response is intimate, while responses to wrongs are more open-ended. However, Birks’s explanation for this difference opens the door to the discretionary remedialism that he seeks to repudiate.81 Instead of making the plausible argument that the strong relationship between event and response in the case of not-wrongs is replicated in the case of wrongs through the remedy of compensation, thereby reducing the role of discretion in the grant of remedy, Birks supports as a response to wrongs a range of remedies that do not necessarily bear a rational relationship to the liability in question.82 It is true that, unlike the discretionary remedialists, Birks would allow the plaintiff, rather than the court, to make the choice between the available rights. But at least one of those choices, exemplary damages, will surely always be at the discretion of the court. It is inconceivable that precedent could develop to the extent of establishing such certainty in the circumstances in which exemplary damages are awarded that the defendant would concede a punitive element in a settlement with the plaintiff. Indeed, the cases themselves speak of a ‘discretion’ to award exemplary damages.83 Birks’s attack on discretionary remedialism begins to fall in on itself. There are, however, even more serious objections to the supposed importance of the distinction between wrongs and not-wrongs. First, the distinction has no obvious utility. There are difficult cases in which it may be unclear what rights the relevant events generate. Birks gives two examples: in undue influence cases, the bad behaviour of the overbearing 80 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 23–4. See also P Birks, ‘Three Kinds of Objection to Discretionary Remedialism’ (2000) 29 University of Western Australia Law Review 1. Cf S Evans, ‘Defending Discretionary Remedialism’ (2001) 23 Sydney Law Review 463. 81 See Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 33, where Birks notes his agreement with the discretionary remedialists on the ‘wide choice’ of responses to wrongs. 82 See pt IV of this essay. 83 Eg Lamb v Cotogno (1987) 164 CLR 1, 12–13 (HCA); Trend Management Ltd v Borg (1996) 40 NSWLR 500, 505 (NSWCA). In Gray v Motor Accidents Commission (1998) 196 CLR 1, [30] (HCA), Gleeeson CJ, McHugh, Gummow and Hayne JJ recognised the difficulties associated with the discretionary nature of exemplary damages and of attempting to analyse them in terms of ‘rights’ or ‘claims’, but (understandably) avoided provoking ‘an unproductive debate about jurisprudential classifications’.

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party may be seen as a wrong or as simply impairing the decision of the transferor of wealth84; in insurance cases, the insured’s breach of the duty of non-disclosure may be viewed either as a wrong or as a reason allowing the insurer to avoid the contract by reason of the mistake under which the insurer laboured by virtue of the non-disclosure.85 In retrospect, the rights generated by these events may answer the question whether the events involve not-wrongs or wrongs. For example, an award of damages will generally show that there has been a wrong. But in prospect, looking to the rights that will potentially be generated merely begs the question of liability. That question can only be answered, in Birks’s own words: [F]rom the policies and values underlying the recognition of the primary duty which is in question . . . [E]conomic efficiency has to contest the field with liberal autonomy and moral paternalism, for the primary duties lie on the frontiers of law, politics and philosophy.86

The second objection is that liability cannot, in any event, be dispersed simply between not-wrongs and wrongs. There is no bright line between enforceability and non-enforceability, but rather an ‘ascending scale’.87 This is particularly so where there is some discretionary element in the establishment of the superstructural or primary right. Two examples must suffice. The first concerns promissory estoppel and calls into play traditional equitable doctrine. The second is liability for invasion of privacy, which engages the modern law of human rights. The difficulties of imposing liability on defendants for conduct in the course of negotiating an agreement that may or may not result in a contract are well known and have been around for centuries.88 Sometimes the defendant will be liable in tort for a deceitful or negligent statement. At other times, the defendant will be liable in equity for an innocent misrepresentation, or, more generally, by reason of the equitable doctrine of estoppel. In the well-known decision of the High Court of Australia in Waltons Stores (Interstate) Ltd v Maher,89 the defendant corporation which had encouraged an assumption in the plaintiffs that a contract would come into existence, and which had knowingly allowed the plaintiffs to rely on that assumption to their detriment, was estopped from retreating from its implied promise to complete the contract. In all the 84 See further, P Birks and Chin Nyuk Yin, ‘On the Nature of Undue Influence’ in J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law (Oxford, Clarendon Press, 1995) ch 3. 85 Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 31–3. 86 Birks, n 30 above, 51. 87 The phrase Lon Fuller used in 1938 in a letter to Karl Lewellyn as a contrast to a supposed ‘contract–no-contract’ dichotomy: see R Summers, Lon L Fuller (Stanford, CA, Stanford University Press, 1984) 133. 88 See P Stein, Fault in the Formation of Contract in Roman Law and Scots Law (Edinburgh, Oliver and Boyd, 1958) esp chs 13, 14. 89 (1988) 164 CLR 387 (HCA).

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circumstances its conduct was unconscionable and attracted equity’s intervention. The remedy, reflecting ‘the minimum equity to do justice to the plaintiff’,90 was damages in lieu of specific performance. The ‘minimum equity’ of the remedy, coupled with equity’s power to award remedies on terms, provides no basis for general determination whether, in cases such as this, the rights generated respond to a wrong or a not-wrong. Nor does the remedy actually granted in the case. The award of damages suggests that the defendant had wronged the plaintiff. But the damages here are statutory, awarded under Lord Cairns’s Act in place of specific performance. Since there was no breach of contract or threatened breach of contract, specific performance must have been founded on the equities arising from the unconscionable conduct.91 To describe that conduct as ‘wrongful’ may, however, import an inappropriate analogy to tort, simply because ‘unconscionabilty’ may not be reducible to statement in terms of its ingredients with quite the same precision as are causes of action in tort. In other words, to place cases of equitable estoppel like this into the category of wrongs may simply be to fit a square peg into a round hole. An alternative is to treat the case as a not-wrong. As such, it most likely fits into ‘consent’,92 or, arguably, into ‘unjust enrichment’ or ‘miscellaneous other events’. However, because the remedy is damages (including, no doubt, consequential damages where relevant), placing a case like Waltons Stores into the not-wrong category questions a supposed important distinguishing characteristic of wrongs and not-wrongs, namely the limited responses to events that they are supposed to generate by virtue of their weak facts. Invasion of privacy is our second illustration. In modern English law, the protection of private information is now the focus of the action for breach of confidence,93 long protected in contract and in equity.94 While there is a public interest in the protection of confidences, any attempt at such protection soon runs into conflict with other public interests, such as that in freedom of expression.95 Lord Denning’s early suggestion that

See Crabb v Arun District Council [1976] 1 Ch 179, 198 (CA, per Scarman LJ). Itself presenting a potential problem for the application of Lord Cairns’s Act: see RP Meagher, JD Heydon and MJ Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (Sydney, Butterworths LexisNexis, 4th edn, 2002) [23-105]. 92 See Birks, n 55 above, 63–4, though the artificiality of the phrase ‘detrimental reliance promise’ is cause for suspicion. 93 The English Court of Appeal has rejected the view that there are now two versions of breach of confidence in English law: see Associated Newspapers Ltd v HRH the Prince of Wales [2006] EWCA 1776, [65], disagreeing with Hosking v Runting [2003] 3 NZLR 285, [42] (NZCA). 94 See F Gurry, Breach of Confidence (Oxford, Clarendon Press, 1984) esp ch 2. 95 See Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 282 (HL). 90 91

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in cases of confidential information it is a question of balancing the public interest in maintaining the confidence against the public interest in knowing the truth96

which was criticised for turning the obligation of confidence into a general discretion allowing the courts to decide whether or not to enforce a confidence in any particular case,97 now embodies an approach mediated by the Human Rights Act 1998 (UK).98 That Act gives effect in English law to the provisions of the European Convention on Human Rights,99 which contains guarantees of privacy in Article 8, as well as a guarantee of freedom of expression in Article 10. Lord Steyn recently described how these two articles interact100: First, neither article has as such precedence over the other. Secondly, where the values under the two articles are in conflict, an intense focus on the comparative importance of the specific rights being claimed in the individual case is necessary. Thirdly, the justifications for interfering with or restricting each right must be taken into account. Finally, the proportionality test must be applied to each.

Thus, in determining whether or not privacy will be protected in any particular case, the court is not concerned with the event-response paradigm, because it does not start with, or search for, an initial superstructural ‘right’. Notwithstanding the language of rights, the focus is on the extent to which the case will realise competing interests. The distinction between wrongs and not-wrongs is simply irrelevant. A possible response is that the current state of privacy law is simply an example of law in the making (lex ferenda) that will, over a course of time, yield clearly identifiable rights. While this view looks forward to the conceptualisation of invasion of privacy as a wrong, Lord Steyn’s methodology suggests it is likely to end up as a merely nostalgic appeal to the supposed certainty of the common law. In Campbell v MGN Ltd,101 the leading case to date on the protection of privacy, it is noticeable that, with the exception of Lord Nicholls,102 the other members of the House of Lords do not describe invasion of privacy in tortious terms, preferring the ambiguity of the equitable doctrine of breach of confidence.103 Woodward v Hutchins [1977] 1 WLR 760, 764. See R Toulson and C Phipps, Confidentiality (London, Thomson, 2nd edn, 2006) [6-017]. The approach is generally rejected in Australia on this basis: see esp Smith Kline Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73, 111 (FCA). 98 See Ash v McKennitt [2006] EWCA 1714, [46]; Associated Newspapers Ltd v HRH the Prince of Wales [2006] EWCA 1176, [67]–[69]. 99 European Convention for the Protection of Human Rights and Fundamental Freedoms, opened for signature 4 November 1950, 213 UNTS 221 (entered into force on 3 September 1953). 100 In re S (a child) [2005] 1 AC 993, [17]. 101 [2004] 2 AC 457 (HL). See also Wainwright v Home Office [2004] 2 AC 406 (HL). 102 Campbell v MGN Ltd [2004] 2 AC 457, [14] (HL). But cf [15] (‘however labelled’). 103 Ibid, esp [43]–[52]. 96 97

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CONCLUSION

My conclusion is that, in his Blackstone Lecture, Professor Birks failed to achieve his aim of establishing that ‘remedy’ is a word that should be expunged from the analytical vocabulary of the law, a task that, in view of the prevalence of the word in legal speech, was always going to be what Australians call ‘a big ask’. Birks himself appreciated this.104 The conclusion does not in any way affect the immense achievements of the Blackstone Lecture in demonstrating the limitations of the taxonomies of Blackstone and Austin and, in doing so, in clarifying the concepts with which it deals. In the latter respect, the Lecture forms part of a grand tradition in analytical jurisprudence.105 As part of Birks’s prodigious scholarship, the Blackstone Lecture revives that tradition, putting it in the mainstream of private law concerns.106 The achievements of the Lecture also explain why Peter Birks was one of the most influential jurists of his age.

Birks, ‘Rights, Wrongs, and Remedies’, n 1 above, 4. F Pollock and R Wright, An Essay on Possession in the Common Law (Oxford, Clarendon Press, 1888) is an outstanding example of this genre. For comment, see N Duxbury, Frederick Pollock and the English Juristic Tradition (Oxford, Oxford University Press, 2004) 109–10. 106 See W Lucy, Philosophy of Private Law (Oxford, Oxford University Press, 2007) 29–30 (drawing attention to the concerns of early-twentieth-century legal philosophers with the analysis of concepts, in contrast to the dominant and ‘relentlessly normative’ concerns of contemporary philosophy of private law). 104 105

The Publications of Peter Birks 1969–2005 THE PUBLI CATI ONS OF PETER BI RKS

COMPILED BY E R I C D E SC H E E MAE K E R Reproduced with permission from A Burrows and A Roger (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006)

BOOKS 1985 1986 1987 1989

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An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985) (ed with N MacCormick) The Legal Mind: Essays for Tony Honore (Oxford, Clarendon Press, 1986) (tr with G McLeod) Justinian’s Institutes (London, Duckworth and Ithaca, NY, Cornell University Press, 1987) An Introduction to the Law of Restitution (Oxford, Clarendon Press, revised edn, 1989) (ed) New Perspectives in the Roman Law of Property: Essays for Barry Nicholas (Oxford, Clarendon Press, 1989) Restitution—The Future (Annandale, NSW, Federation Press, 1992) (ed) Examining the Law Syllabus: The Core (Oxford, Oxford University Press, 1992) (ed) Examining the Law Syllabus: Beyond the Core (Oxford, Oxford University Press, 1993) (ed) The Life of the Law (London, Hambledon, 1985) (with R Chambers) Restitution Research Resource (Oxford, Mansfield Press, 1994) (ed) The Frontiers of Liability, vol 1 (Oxford, Oxford University Press, 1994) (ed) The Frontiers of Liability, vol 2 (Oxford, Oxford University Press, 1994) (ed) Reviewing Legal Education (Oxford, Oxford University Press, 1994) (ed) Laundering and Tracing (Oxford, Clarendon Press, 1995) (ed) Pressing Problems in the Law, vol 1: Criminal Justice and Human Rights (Oxford, Oxford University Press, 1995) (ed) Pressing Problems in the Law, vol 2: What are Law Schools For? (Oxford, Oxford University Press, 1996) (ed) Wrongs and Remedies in the Twenty-first Century (Oxford, Clarendon Press, 1996) (with R Chambers) Restitution Research Resource (Oxford, Mansfield Press, 2nd edn, 1997) (ed) The Classification of Obligations (Oxford, Clarendon Press, 1997) (ed) Privacy and Loyalty (Oxford, Clarendon Press, 1997)

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The Publications of Peter Birks (ed with F Rose) Restitution and Equity, vol 1: Resulting Trusts and Equitable Compensation (London, Mansfield Press, 2000) (ed) English Private Law, vol 1: Sources of Law—The Law of Persons—The Law of Property (Oxford, Oxford University Press, 2000) (ed) English Private Law, vol 2: The Law of’ Obligations—Litigation (Oxford, Oxford University Press, 2000) (ed with F Rose) Lessons of the Swaps Litigation (London, Mansfield Press, 2000) The Foundations of Unjust Enrichment: Six Centennial Lectures (Wellington: Victoria University Press, 2002) (ed with A Pretto) Breach of Trust (Oxford, Hart Publishing, 2002) (ed) English Private Law, First Updating Supplement (Oxford, Oxford University Press, 2002) (ed with A Pretto) Themes in Comparative Law: In Honour of Bernard Rudden (Oxford, Oxford University Press, 2002) Unjust Enrichment (Oxford, Oxford University Press, 2003) (ed) English Private Law, Second Cumulative Updating Supplement (Oxford, Oxford University Press, 2004) Unjust Enrichment (Oxford, Oxford University Press, 2nd edn, 2005)

C O N T R I B U T I O N S TO B O O K S 1974

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Lucius Veratius and the Lei Aebutia’ in A Watson (ed), Daube Nostor Essays in Legal History for David Dauhe (Edinburgh, Scottish Academic Press, 1974) 39–48 Obligations: One Tier or Two?’ in PG Stein and ADE Lewis (eds), Studies in Justinian’s Institutes in Memory of JAC Thomas (London, Sweet & Maxwell, 1983) 18–38 ‘The Case of the Filched Pedigree: D.47.2.52.20’ in Sodalitas: Scritti in Onore di Antonio Guarino (Naples: Jovene Editore, 1984) 731–48 Translation of books 12 and 13 in A Watson (ed), The Digest of Justinian, 1 (Philadelphia, PA University of Pennsylvania Press, 1985) 357–414; reprinted in the 1998 revised English-language edition Fictions Ancient and Modern’ in N MacCormick and P Birks (eds), The Legal Mind: Essays for Tony Honoré (Oxford, Clarendon Press, 1986) 83–101 Introduction’ in W Fulbeck, Fulbeck’s Direction, or Preparative to the Study of the Law (Aldershot, Wildwood House, 1987) iii–xviii ‘Introduction’ in P Birks and G McLeod (tr), Justinian’s Institutes (London, Duckworth and Ithaca, NY, Cornell University Press, 1987) 7–28 The New Equity and the Need for Certainty’ in FE McArdle (ed), The Cambridge Lectures 1987 (Montreal, Éditions Yvon Blais, 1989) 309–22 ‘An Unacceptable Face of Human Property in P Birks (ed), New Perspectives in the Roman Law of Property: Essays for Barry Nicholas (Oxford, Clarendon Press, 1989) 61–73 ‘

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‘Restitution from the Executive: A Tercentenary Footnote to the Bill of Rights in PD Finn (ed), Essays on Restitution (North Ryde, NSW: Law Book Co, 1990) 164–205 ‘In Defence of Free Acceptance’ in A Burrows (ed), Essays on the Law of Restitution (Oxford, Clarendon Press, 1991) 105–46 Civil Wrongs: A New World’ in Butterworth Lectures 1990–91 (London, Butterworths, 1992) 55–112 ‘Restitution and Resulting Trusts’ in S Goldstein (ed), Equity and Contemporary Legal Developments (Jerusalem: The Harry and Michael Sacher Institute for Legislative Research and Comparative Law, 1992) 335–73. Reprinted in P Birks and F Rose (eds), Restitution and Equity, 1: Resulting Trusts and Equitable Compensation (London, Mansfield Press, 2000) 265–83 ‘Trusts in the Recovery of Misapplied Assets: Tracing, Trusts, and Restitution’ in E McKendrick (ed), Commercial Aspects of Trusts and Fiduciary Obligations (Oxford, Clarendon Press, 1992) 149–66 ‘Introduction’ in P Birks (ed), Examining the Law Syllabus: The Core (Oxford, Oxford University Press, 1992) 7–10 ‘Mixtures’ in N Palmer and E McKendrick (eds), Interests in Goods (London, Lloyds of London Press, 1993) 449–68 ‘A Decade of Turmoil in Legal Education’ in P Birks (ed), Examining the Law Syllabus: Beyond the Core (Oxford, Oxford University Press, 1993) 9–17 The Historical Context’ in P Birks (ed), Reviewing Legal Education (Oxford, Oxford University Press, 1994) 1–8 Short-cuts’ in P Birks (ed), Reviewing Legal Education (Oxford, Oxford University Press, 1994) 20–36 Gifts of Other Peoples Money’ in P Birks (ed), The Frontiers of Liability, 1 (Oxford, Oxford University Press, 1994) 31–40 ‘Proprietary Rights as Remedies’ in P Birks (ed), The Frontiers of Liability, 2 (Oxford, Oxford University Press, 1994) 214–223 ‘The Edictal Rubric “Ad Legem Aquiliam”’ in R Perez-Bustamente (ed), Estudios de historia del derecho europeo: bonsenaje al professor Gonzalo Martinez Diez, 1 (Madrid, Editorial Complutense, 1994) 81–9 Peter Stein, Regius Professor of Civil Law in the University of Cambridge, 1968–1993’ in ADE Lewis and DJ Ibbetson (eds), The Roman Law Tradition (Cambridge, Cambridge University Press, 1994) p xi Doing and Causing to be Done’ in ADE Lewis and DJ Ibbetson (eds), The Roman Law Tradition (Cambridge, Cambridge University Press, 1994) 31–53 (with NA Chin) ‘On the Nature of Undue Influence’ in J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law (Oxford, Clarendon Press, 1995) 57–97 Legal Education in England and Scotland’ in SCJJ Kortmann (ed), Legal Education in the Netherlands in a Comparative Perspective (Nijmegen, Grotius Academy, 1995) 15–35 Restitution for Wrongs’ in EJH Schrage (ed), Unjust Enrichment: The Comparative Legal History of the Law of Restitution (Berlin, Duncker & Humblot, 1995) 171–96; reprinted in the 2nd edn of the book (1999) ’

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The Publications of Peter Birks ‘Ulpian 18 ad Edictum: Introducing Damnum Iniuria’ in R Feenstra, AS Hartkamp, JE Spruit, PJ Sijpesteijn and LC Winkel (eds), Collatio Iuris Romani, vol 1 (Amsterdam, Gieben, 1995) 17–36 The Foundation of Legal Rationality in Scotland in R Evans-Jones (ed), The Civil Law Tradition in Scotland (Edinburgh, Stair Society, 1995) 81–99 ‘Overview: Tracing, Claiming and Defences in P Birks (ed), Laundering and Tracing (Oxford, Clarendon Press, 1995) 289–348 ‘Change of Position, the Nature of the Defence and its Relationship to Other Defences’ in M McInnes (ed), Restitution: Developments in Unjust Enrichment (Sydney, LBC Information Services, 1996) 49–74 ‘Failure of Consideration’ in F Rose (ed), Consensus ad Idem: Essays in the Law of Contract in Honour of Guenter Treitel (London, Sweet & Maxwell, 1996) 179–202 ‘The Concept of a Civil Wrong in D Owen (ed), Philosophical Foundations of Tort Law (Oxford, Clarendon Press, 1996) 29–52 ‘This Heap of Good Learning: The Jurist in the Common Law Tradition’ in BS Markesinis (ed), The Clifford Chance Lectures, 2: Law Making, Law Finding and Law Shaping: The Diverse Influences (Oxford, Oxford University Press, 1997) 113–38 ‘More Logic and Less Experience: The Difference between Scots Law and English Law in DL Carey Miller and R Zimmermann (eds), The Civilian Tradition and Scots Law: Aberdeen Quincentenary Essays (Berlin, Duncker & Humblot, 1997) 167–90 Change of Position and Surviving Enrichment in W Swadling (ed), The Limits of Restitutionary Claims: A Comparative Analysis (United Kingdom Comparative Law Series, No 17, London, United Kingdom National Committee of Comparative Law, 1997) 36–63 The Necessity of a Unitary Law of Tracing’ in R Cranston (ed), Making Commercial Law: Essays in Honour of Roy Goode (Oxford, Clarendon Press, 1997) 249–58 Definition and Division: A Meditation on Institutes 3.13 in P Birks (ed), The Classification of Obligations (Oxford, Clarendon Press, 1997) 1–36 ‘Before we Begin: Five Keys to Land Law in S Bright and J Dewar (eds), Land Law: Themes and Perspectives (Oxford, Oxford University Press, 1998) 457–86 ‘Mixtures’ in N Palmer and E McKendrick (eds), Interests in Goods (London, Lloyd’s of London Press, 2nd edn, 1998) 227–49 (2nd edn of the 1993 article, above) ‘Misnomer in WR Cornish, R Nolan, J OSullivan, and G Virgo (eds), Restitution, Past, Present and Future: Essays in Honour of Gareth Jones (Oxford, Hart Publishing, 1998) 1–30 The Burden on the Bank’ in F Rose (ed), Restitution and Banking Law (Oxford, Mansfield Press, 1998) 189–232 ‘Can we get Nearer to the Text of the Lex Aquilia?’ in BCM Jacobs and EC Coppens (eds), Een rijk gerecht: opstellen aangeboden dan prof. mr. P. L. Neve (Nijmegen, Gerard Noodt Instituut, 1998) 25–41 ‘

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‘Large Scale Fraud: Sharpening the Weapons of Restitution’ in JJ Norton (ed), Yearbook of International Financial and Economic Law 1996 (London, Kluwer Law, 1998) 291–315 The Role of Fault in the Law of Unjust Enrichment’ in W Swadling and G Jones (eds), The Search for Principle: Essays in Honour of Lord Goff of Chieveley (Oxford, Oxford University Press, 1999) 235–75 ‘Private Law in P Birks and F Rose (eds), Lessons of the Swaps Litigation (London, Mansfield Press, 2000) 1–45 Introduction in P Birks (ed), English Private Law, 1 (Oxford, Oxford University Press, 2000) xxv-li (with C Mitchell) Unjust Enrichment’ in P Birks (ed), English Private Law, vol 2 (Oxford, Oxford University Press, 2000) 525–635 ‘Epilogue in P Birks and P Rose (eds), Restitution and Equity, 1: Resulting Trusts and Equitable Compensation (London, Mansfield Press, 2000) 261–2 ‘Negligence in the Eighteenth Century Common Law in EJH Schrage (ed), Negligence: The Comparative Legal History of the Law of Torts (Berlin, Duncker & Humblot, 2001) 173–227 (with C Mitchell) ‘Unjust Enrichment in P Birks (ed), English Private Law, First Updating Supplement (Oxford, Oxford University Press, 2002) 99–108 ‘“At the Expense of the Claimant”: Direct and Indirect Enrichment in English Law’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 493–525; originally published in (2000) 1 Oxford University Comparative Law Forum at htrpa/ouclf.iuscomp.org/articleslbirks.shtml Receipt’ in P Birks and A Pretto (eds), Breach of Trust (Oxford, Hart Publishing, 2002) 213–40 ‘Comparative Unjust Enrichment in P Birks and A Pretto (eds), Themes in Comparative Law: In Honour of Bernard Rudden (Oxford, Oxford University Press, 2002) 137–51 ‘Restitution of Unjust Enrichment’ in A Burrows and E Peel (eds), Commercial Remedies: Current Issues and Problems (Oxford, Oxford University Press, 2003) 131–69 ‘Events and Responses: The Case of Trusts in C Wasserstein and I Gilead (eds), Classification of Private Law: Bases of Liability and Remedies (Jerusalem, The Harry and Michael Sacher Institute for Legislative Research and Comparative Law, 2003) 159–87 ‘Series Editors Foreword in D Feldman (ed), English Public Law (Oxford, Oxford University Press, 2004) pp vii–viii Retrieving Tied Money in W Swadling (ed), The Quistclose Trust: Critical Essays (Oxford, Hart Publishing, 2004) 121–43 (with C Mitchell) Unjust Enrichment’ in P Birks (ed), English Private Law, Second Cumulative Updating Supplement (Oxford, Oxford University Press, 2004) 157–77 ‘Roman Law in Twentieth-century Britain in J Beatson and R Zimmermann (eds), Jurists Uprooted: German-speaking Émigré Lawyers in TwentiethCentury Britain (Oxford, Oxford University Press, 2004) 249–68 ‘

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The Publications of Peter Birks A RT I C L E S A N D CA S E N OT E S

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‘From Legis Actio to Formula’ (1969) 4 Irish Jurist (ns) 356–67 ‘The Early History of Iniuria’ (1969) 37 Tijdschrift voor Rechtsgeschiedenis 163–208 ‘The Problem of Quasi-delict (1969) 22 Current Legal Problems 164–80 ‘Negotiorum Gestio and the Common Law (1971) 24 Current Legal Problems 110–32 English Beginnings and Roman Parallels (1971) 6 Irish Jurist (ns) 147–62 ‘The Recovery of Carelessly Mistaken Payments (1972) 25 Current Legal Problems 179–99 ‘A Note on the Development of Furtum’ (1973) 8 Irish Jurist (ns) 349–55 ‘Restitution for Services (1974) 27 Current Legal Problems 13–36 ‘No Shield for a Stranger’ (1975) 1 Poly Law Review 39–44 (with J Beatson) ‘Unrequested Payment of Another’s Debt (1976) 92 LQR 188–212 ‘Infamandi Causa Facta in Disguise (1976) Acta Juridica 83–104 ‘Restitution from Public Authorities (1980) 33 Current Legal Problems 191–211 ‘Other Mens Meat: Aquilian Liability for Proper Use (1981) 16 Irish Jurist (ns) 141–85 ‘Restitution and Wrongs (1982) 35 Current Legal Problems 53–76 ‘Restitution and the Freedom of Contract (1983) 36 Current Legal Problems 141–62 ‘Honoré’s Ulpian (1983) 18 Irish Jurist (ns) 151–81 ‘English and Roman Learning in Moses v Macferlan (1984) 37 Current Legal Problems 1–28 ‘A New Argument for A Narrow View of Litem Suam Facere’ (1984) 52 Tijdschrift voor Rechtsgeschiedenis 373–87 (with A Rodger and JS Richardson) Further Aspects of the Tabula Contrebiensis (1984) 74 Journal of Roman Studies 45–73 ‘Restitution: A View of the Scots Law (1985) 38 Current Legal Problems 57–82 ‘Six Questions in Search of a Subject [1985] Juridical Review 227–52 ‘Unjust Enrichment—A Reply to Mr Hedley’ (1985) 5 Legal Studies 67–76 (Reply to S Hedley, ‘Unjust Enrichment as the Basis of Restitution—An Overworked Concept’ (1985) 5 Legal Studies 56–66) ‘A Point of Aquilian Pleading’ (1985) 36 IVRA 97–107 ‘Cooking the Meat: Aquilian Liability for Hearths and Ovens’ (1985) 20 Irish Jurist (ns) 352–77 ‘The Roman Concept of Dominium and the Idea of Absolute Ownership’ [1985] Acta Juridica 1–38 (with G McLeod) ‘The Implied Contract Theory of Quasi-Contract: Civilian Opinion Current in the Century before Blackstone (1986) 6 Oxford Journal of Legal Studies 46–85 ‘Restitutionary Damages for Breach of Contract: Snepp and the Fusion of Law and Equity [1987] Lloyd’s Maritime and Commercial Law Quarterly 421–42 ’

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‘New Light on the Roman Legal System: The Appointment of Judges (1988) 47 CLJ 36–60 ‘Ulpius Marcellus and an Ancient Mystery—Part 1: Multiple Transfer and Threefold Mancipation (1988) 23 Irish Jurist (ns) 99–128 Personal Restitution in Equity’ [1988] Lloyd’s Maritime and Commercial Law Quarterly 128–35 ‘Misdirected Funds: Restitution from the Recipient [1989] Lloyd’s Maritime and Commercial Law Quarterly 296–341 ‘3 × 1 = 3: An Arithmetical Solution to the Problem of Threefold Mancipation’ (1989) 40 IVRA 55–63 (part II of ‘Ulpius Marcellus and an Ancient Mystery, above) ‘Misdirected Funds’ (1989) 105 LQR 352–6 Misdirected Funds Again (1989) 105 LQR 528–34 ‘A Lifelong Obligation of Confidence (1989) 105 LQR 501–8 ‘Restitution after Ineffective Contracts: Issues for the 1990s’ (1990) 2 Journal of Contract Law 227–40 ‘The Independence of Restitutionary Causes of Actions’ (1990) 16 University of Queensland Law Journal 1–26 Restitution without Counter-Restitution [1990] Lloyd’s Maritime and Commercial Law Quarterly 330–8 ‘The Travails of Duress’ [1990] Lloyd’s Maritime and Commercial Law Quarterly 342–51 ‘The Remedies for Abuse of Confidential Information [1990] Lloyd’s Maritime and Commercial Law Quarterly 460–5 ‘The English Recognition of Unjust Enrichment’ [1991] Lloyd’s Maritime and Commercial Law Quarterly 473–507 Legal Education (1992) 109 LQR 521–4 ‘Studying Law in Germany (1992) 26 Law Teacher 215–18 ‘“When Money is Paid in Pursuance of a Void Authority . . .”—A Duty to Repay?’ [1992] Public Law 580–91 The Condition of the English Law of Unjust Enrichment [1992] Acta Juridica 1–22 (TW Bennett, DJ Devine, DB Hutchison, I Leeman, CM Murray, and D van Zyl Smit (Eds), Festschrift Wouter de Vos (Cape Town, Juta & Co, 1992) Mixing and Tracing: Property and Restitution (1992) 45 Current Legal Problems 69–98 ‘The Model Pleading of the Action for Wrongful Loss (1992) 25–7 Irish Jurist (ns) 311–28 (= Liber Memorialis John M Kelly) ‘The One-year Lawyer (1992) 142 New Law Journal 1015 ‘Konkurrierende Strategien und Interessen: Das Irrtumserfordernis im Bereicherungsrecht des common law’ (1993) 1 Zeitschrift fur Europaisches Privatrecht 554–73 (translated by R Zimmermann) ‘No Consideration: Restitution after Void Contracts (1993) 23 University of Western Australia Law Review 195–234 ‘Persistent Problems in Misdirected Money: A Quintet [1993] Lloyd’s Maritime and Commercial Law Quarterly 218–37 ‘Restitution: Dynamics of the Modern Law (1993) 46 Current Legal Problems 157–82 ’

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The Publications of Peter Birks Obligations and Property in Equity: Lister v Stubbs in the Limelight [1993] Lloyd’s Maritime and Commercial Law Quarterly 30–3 Modernising the Law of Restitution (1993) 109 LQR 164–8 ‘Profits of Breach of Contract (1993) 109 LQR 518–21 (with F Rose) Editorial (1993) 1 Restitution Law Review 1–6 Mr Justice Willes Dream (1993) 6 SPTL Reporter 27–30 The Rise and Rise of the Non-law Graduate (1993) 7 SPTL Reporter 3–4 Qualifying Degrees: New Proposals for 1995’ (1993) 7 SPTL Reporter 14–15 Adjudication and Interpretation in the Common Law: A Century of Change (1994) 14 Legal Studies 156–79. Reprinted in BS M Markesinis (ed), The Clifford Chance Lectures, 1: Bridging the Channel (Oxford, Oxford University Press, 1996) 135–64 ‘Major Developments in the Law of Restitution (1994) 6 Singapore Academy of Law Journal 253–71 ‘Property in the Profits of Wrongdoing (1994) 24 University of Western Australia Law Review 8–16 Wrongful Loss by Co-promisees (1994) 22 Index 181–8 (with F Rose) ‘In rem or in personam? Webb v Webb’ (1994) 8 Trust Law International 99–101 Editorial [1994) 2 Restitution Law Review 1–2 To Be Built on Sand: The Future Form of the CPE’ (1994) 8 SPTL Reporter 1–4 ‘The Consolation of Cassandra (1994) 9 SPTL Reporter 28–9 ‘Establishing a Proprietary Base (Re Goldcorp)’ (1995) 3 Restitution Law Review 83–93 Tracing, Subrogation and Change of Position (Boscawen v Bajwa, Abbey National plc v Boscawen)’ (1995) 9 Trust Law International 124–6 ‘Tracing Misused (Bank Tejarat v Hong Kong and Shanghai Banking Corp)’ (1995) 9 Trust Law International 91–5 Shallow Foundations (1995) 111 LQR 371–5 ‘Compulsory Subjects: Will the Seven Foundations ever Crumble?’ (1995) 1 Web Journal of Current Legal Issues, available online at http://webjcli.ncl.ac.uk/articlesl/birksl.html; reprinted in MJ Allen (ed), The Web Journal of Current Legal Issues: 1995 Yearbook (London, Blackstone, 1996) 38–47 ‘Proprietary Restitution: An Intelligible Approach (1995) 9 Trust Law International 43–9 Villainy with a Smiling Cheek (1995) 10 SPTL Reporter 16–18 ‘Accessory Liability’ [1996] Lloyd’s Maritime and Commercial Law Quarterly 1–6 ‘The Proceeds of Mortgage Fraud (1996) 10 Trust Law International 2–5 ‘Trusts Raised to Reverse Unjust Enrichment: The Westdeutsche Case (1996) 4 Restitution Law Review 3–26 ‘Equity in the Modern Law: An Exercise in Taxonomy (1996) 26 University of Western Australia Law Review 1–99 ‘Inconsistency between Compensation and Restitution (1996) 112 LQR 375–8 ‘

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‘ACLEC: The Research Dimension (1996) 13 SPTL Reporter 16–17 ‘The Imitation of King James II & VII, or, On Not Giving a for the Rule of Law’ (1996) 12 SPTL Reporter 19–22 (with W Swadling) ‘Restitution’ [1996] All England Reports Review 366–95 Unjust Factors and Wrongs: Pecuniary Rescission for Undue Influence (1997) 5 Restitution Law Review 72–9 Obligations Arising without Agreement under the Louisiana Civil Code (1997) 5 Restitution Law Review 222–8 On Taking Seriously the Difference between Tracing and Claiming (1997) 11 Trust Law International 2–9 ‘Property and Unjust Enrichment: Categorical Truths [1997] New Zealand Law Review 623–67 Harassment and Hubris: The Right to an Equality of Respect (1997) 32 Irish Jurist (ns) 1–45 (revised version of the 1996 pamphlet, below) (with W Swadling) ‘Restitution’ [1997] All England Reports Review 385–407 ‘Notice and Onus in O’Brien’ (1998) 12 Trust Law International 1–15 The End of the Remedial Constructive Trust? (1998) 12 Trust Law International 201–15 The Academic and the Practitioner (1998) 16 SPTL Reporter 21–6 (abridged version of the 1999 Legal Studies article, below) (with W Swadling) ‘Restitution’ [1998] All England Reports Review 390–416 ‘The Academic and the Practitioner’ (1998) 18 Legal Studies 397–414 Equity, Conscience, and Unjust Enrichment (1999) 23 Melbourne University Law Review 1–29 ‘The Law of Restitution at the End of an Epoch’ (1990) 28 University of Western Australia Law Review 13–64 ‘The Law of Unjust Enrichment; A Millennial Resolution’ (1999) 40 Singapore Journal of Legal Studies 318–32 (with W Swadling) ‘Restitution [1999] All England Reports Review 312–26 ‘The Content of Fiduciary Obligation (2000) 34 Israel Law Review 3–38 ‘Personal Property: Proprietary Rights and Remedies (2000) 11 King’s College Law Journal 1–18 ‘Three Kinds of Objection to Discretionary Remedialism (2000) 29 University of Western Australia Law Review 1–17 ‘Mistakes of Law (2000) 53 Current Legal Problems 205–36 Recovering Value Transferred under an Illegal Contract’ (2000) 1 Theoretical Inquiries in Law 155–204 ‘Rights, Wrongs, and Remedies (2000) 20 OILegal Studies 1–37 ‘A Banks Mistaken Payments: Two Recent Cases and their Implications (2000) 6 New Zealand Business Law Quarterly 155–65 (with W Swadling) Restitution [2000] All England Reports Review 315–31 ‘Knowing Receipt: Re Montagus Settlement Trusts Revisited (2001) 1 Global Jurist Advances, available online at http://www.bepress.com/gj/ advances/vol1/iss2/art2 ’

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450

The Publications of Peter Birks ‘Property, Unjust Enrichment, and Tracing (2001) 54 Current Legal Problems 231–54 ‘Unjust Enrichment and Wrongful Enrichment (2001) 79 Texas Law Review 1767–94 (with W Swadling) ‘Restitution [2001] All England Reports Review 322–33 ‘Failure of Consideration and its Place on the Map (2002) 2 Oxford University Commonwealth Law Journal 1–13 ‘The Content of Fiduciary Obligation (2002) 16 Trust Law International 34–52 (abbreviated version of the 2000 Israel Law Review article, above) (with W Swadling) ‘Restitution [2002] All England Reports Review 315–27 ‘A Letter to America: The New Restatement of Restitution (2003) 3 Global Jurist Frontiers, available online at ’

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2002

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2003

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http://www.bepress.com/gj/frontiers/vol3/iss2/art2 (with W Swadling) ‘Restitution [2003] All England Reports Review 354–72 ‘Undue Influence as Wrongful Exploitation (2004) 120 LQR 34–7 ‘Change of Position: The Two Central Questions (2004) 120 LQR 373–8 ’

2004

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PAM P H L E T S 1995 1996

The Structure of the English Law of Unjust Enrichment (Nijmegen, Centrum voot postdoctoral onderwijs, 1995) Harassment and Hubris: The Right to an Equality of Respect, Being the Second John Maurice Kelly Memorial Lecture (Dublin, University College Dublin, Faculty of Law, 1996)

B O O K R E VI E W S AN D R E VI E W A RT I C L E S 1972 1973 1978 1983 1984 1985 1986

A Watson, Roman Private Law around 200 BC (Edinburgh, Edinburgh University Press, 1971) in (1972) 88 LQR 293–4 AHM Jones, The Criminal Courts of the Roman Republic and Principate (Oxford, Blackwell, 1972) in (1973) 89 LQR 440–1 JM Kelly, Studies in the Civil Judicature of the Roman Republic (Oxford, Clarendon Press, 1976) in (1978) 28 Classical Review (ns) 97–8 T Honore, Tribonian (London, Duckworth, 1978) in (1983) 33 Classical Review (ns) 246–9 F Lyall, S/aves, Citizens, Sons: Legal Metaphors in the Epistles (Grand Rapids, MI, Academic Books, 1984) in (1984) 18 Irish Jurist (ns) 140–3 P Stein, Legal Institutions: The Development of Dispute Settlement (London, Butterworths, 1984) in (1985) 5 Legal Studies 238–41 DM Walker, The Scottish Jurists (Edinburgh, W Green, 1985) in (1986) 7 Journal of Legal History 238–40 .

The Publications of Peter Birks 1987

1990 1992

1996

1997

1999 2003

2004

451

‘An Enemy of Promises (review of PS Atiyah, Essays on Contract (Oxford, Clarendon Press, 1986)) in Times Literary Supplement, 23–9 October 1987, 1173 ‘The Rise of the Roman Jurists’ (review of BW Frier, The Rise of the Roman Jurists: Studies in Cicero’s pro Caecina (Princeton, NJ, Princeton University Press, 1985) in (1987) 7 Oxford Journal of Legal Studies 444–53 D Johnston, The Roman Law of Trusts (Oxford, Clarendon Press, 1988) in (1990) 10 Legal Studies 353–6 RA Bauman, Lawyers and Politics in the Early Roman Empire. A Study of Relations between the Roman Jurists and the Emperors from Augustus to Hadrian (Munich, CH Beck, 1989) in (1992) 82 Journal of Roman Studies 260–2 R Zimmermann, The Law of Obligations: Roman Foundations of the Civilian Tradition (Cape Town, Juta & Co, 1990) in (1992) 13 Journal of Legal History 311–14 ‘Pharisees on the Bench (review of AWB Simpson, Leading Cases in the Common Law (Oxford, Clarendon Press, 1995) in Times Literary Supplement, 8 March 1996, 29 (with various authors) ‘The First Australian Textbook on Restitution’ (review of K Mason and JW Carter, Restitution Law in Australia (Sydney, Butterworths, 1995) in (1997) 5 Restitution Law Review 229–48 DM Wright, The Remedial Constructive Trust (Sydney, Butterworths, 1998) in (1999) 115 LQR 681–8 C Rotherham, Proprietary Remedies in Context: A Study in the Judicial Redistribution of Property Rights (Oxford, Hart Publishing, 2002) in (2003) 119 LQR 156–61 RP Meagher, JD Heydon and MJ Leeming (eds), Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (Sydney, Butterworths LexisNexis, 4th edn, 2002) in (2004) 120 LQR 344–8 ’

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L E T T E RS 1983

1986

1992

1993

Ulpian’ Times Literary Supplement, 4 March 1983, 215 (re: A Watson) ‘Not a Week Without a Book’ Times Literary Supplement, 18 February 1983, 164 – review of T Honoré, Ulpian (Oxford, Clarendon Press, 1982) ‘Roman Law’ Times Literary Supplement, 17 October 1986, 1163 (re: R Seager, ‘The Greece and Rome Tome’, Times Literacy Supplement, 3 October 1986, 1108—review of J Boardman, J Griffin, and O Murray (eds), The Oxford History of the Classical World (Oxford, Oxford University Press, 1986) ‘One-Year Lawyers’ (1992) 142 New Law Journal 1152 (postscript to the article at 1015, above) ‘A Law unto Itself’ Times Higher Education Supplement, 28 August 1992, 17 ‘Rough Justice for Students’ The Times, 14 September 1993, 31 ‘

452

The Publications of Peter Birks P E RS O N A L I A

1996 2004

(with R Buckley) ‘Professor RFV Heuston’ (1996) 12 SPTL Reporter 45–6 ‘John Kieran Barry Moylan Nicholas (1919–2002)’ (2004) 124 Proceedings of the British Academy 219–42

INDEX

Index I NDEX

abducing, 107 abstraction, 63–6, 71 academic writing, 131–4, 137 Ackerman, Bruce, 164 Allward, Walter, 90 American Law Institute: Boomer v Muir, 181 Restatement of the Law of Restitution coherence, 6 inducing breach of contract, 188 unjust enrichment, 68 Second Restatement of Torts, estoppel, 322, 325, 326, 327–8 Third Restatement of Economic Torts, 331, 332 Third Restatement of the Law of Restitution contract and unjust enrichment, 170 inducing breach of contract, 188 unjust enrichment, 68–70 Ames, James Barr, 5–6 analogies, 108, 116, 117, 119, 122, 125 Aristotle, 14, 28, 55, 280 assignment, fraud and, 369–76 Australia: breach of trust Farah case, 340–1, 347, 351–9 preserving equitable rights, 341–51 recovery in specie, 347–51 recovery of land, 339–59 equity, 11 Torrens system of title registration, 340, 349, 355–9 unjust enrichment advance payments, 226, 235–6, 239–44 causa data causa non secuta, 173–4 public policy factors, 273–4, 284 unconscionable conduct or, 143 bankruptcy see insolvency Bant, E, 284, 285n95, 286 Barker, Kit, 14, 47–74, 282n79 Beatson, Jack, 170, 171, 172, 188, 239–40 Beever, A, 206, 207, 208, 209, 210–11, 213, 216, 217–19 Benson, P, 39n55 Birks, Peter: Blackstone Lecture, 17, 405–6, 407, 420, 421–2, 427–8, 429 common law, 67, 78 constructive trusts, 97

court orders as remedies, 406–13, 415, 418, 419–20 dynamic thinking, 128–9, 145 English Private Law, 2, 85, 268 Foundations of Unjust Enrichment, 4 injustice, 22–4 Introduction to the Law of Restitution, 267 author’s purpose, 6, 129–31 bottom up approach, 12 discourse of system, 127–45, 247 discourse of the possible, 135–40 improver cases, 250–1 restitution from public authorities, 296–7, 300–1 resulting trusts, 379, 391, 400 shape of legal reasoning, 131–4 law as system, 16 negotiorum gestio, 283–4 policy-motivated cases, 273 Air Canada and, 296–7, 301 democracy, 315, 318 duress, 311, 313 evolution, 298–304 influence, 296–7, 307 lack of basis model, 277–80 mistake of law, 312 moral compulsion, 275–6 payments pursuant to common liability, 286 private and public law, 317 positivism, 136, 145, 147 remedies, meaning, 423–8 resulting trusts, 94, 379–81, 391, 393, 394, 400, 404 Roman law and, 2, 3, 5, 80, 135, 412, 428–32 taxonomy see taxonomy unfinished business, 7–13 unjust enrichment advance payments, 243–4 attributes, 258–9, 260 causative events see causative events civilian law approach, 48, 139n49, 143, 225–6, 277–80 abstraction, 63–6, 71 concept, 6–7, 49, 73, 74 contract and, 169, 170, 171–2, 173, 179–80 evaluation, 262–3 evolution, 77–8, 247–8, 362–5

454

Index

improvements see mistaken improvements incidental benefits, 64 independence, 167 lack of basis model, 139n49, 143, 225–6, 277–80 misrepresentation, 367–8 mistaken payments, 53, 254 moral compulsion, 275, 276 no general doctrine, 136, 143 normative basis, 44–5 pyramidal reasoning, 58, 59, 61–3, 71–2 taxonomy, 122, 268–9 theoretical structure, 257–8 ultra vires contracts, 362–7, 376–7 Unjust Enrichment, 78, 129, 225, 247 resulting trusts, 379, 400, 404 Blackstone, William, 17, 160, 426 Blake, George, 88, 182 breach of confidence, 95, 194–5, 438–9 breach of trust: Australian recovery of land and, 339–59 Barnes v Addy, 347–9 case law, 345–7 constructive trusts, 96–7, 343, 344–5, 347, 349, 352, 354, 356–7 Farah case, 340–1, 347, 351–9 good faith purchase, 341–2, 344–6, 348–50 persistence of express trusts, 342–4 preserving equitable rights, 341–51 recovery in specie, 347–51 Bryan, Michael, 17, 339–59 burial cases, 272 Burrows, Andrew, 73, 180, 250n46, 275, 276, 285, 429 Butler, Peter, 16, 225–44 Canada: Charter of Rights and Freedoms, 84 legal education, 84 mistaken payments to public authorities, 291–4 Air Canada, 291, 293–7, 301, 305–6, 308–9, 313, 316 Kingstreet Investments, 298, 306–18 passing on defence, 92, 308–10 rule of law and multiculturalism, 89–91 social policy, 100 unjust enrichment absence of legal basis, 13 constructive trusts, 93–7 contradictions, 91–3 equity, 91–2 judicial approaches, 66–8, 72 policy-motivated unjust factors, 285 restitution and, 97–100 resulting trusts, 93–7, 380

Supreme Court taxonomy, 91–100 Cane, Peter, 52, 54–5 Carter, JW, 240 cartography, 78, 154–5, 211 causa data causa non secuta, 172–6 causation, 52–3 causative events: alignment with responses, 89 Birksian taxonomy, 81, 85, 257–8 catch-all category, 110 evaluation, 262 unjust enrichment, 103–4, 320 wrongs and not-wrongs, 257, 421–2, 432–7 rights and, 431 causes of action, 410–11, 423, 424–5 Chambers, Robert, 17, 86, 93, 94, 379–80, 391, 393 change of position defence, 23n10, 40–2, 189n27, 190, 191, 265, 295, 317, 349 Christian, E, 369 civilian law: abstraction, 63–6, 71 approaches to restitution, 66–72 Birks and, 3, 48, 139n49, 143, 225–6, 277–80 breach of trust and recovery of property, 350 pyramidal reasoning, 58, 59, 61–3, 71–2 Scots law, 2 unjust enrichment, basis, 13, 14, 47–8, 58–60 claims see proprietary claims; unjust enrichment claims classical economics, 51 coercion, 149–51 cohabitational property, 94, 99–100 Cohen, Felix, 152, 155 colore officii doctrine, 292, 298–9, 305 common law: abstraction and, 63–6 approaches to restitution, 66–72 Birksian concept, 78 evolutionary history, 109 moral rationality of unjust enrichment, 57–8 structure of claims, 62 condictio indebiti, 71, 72, 363 confidence, breach of, 95, 194–5, 438–9 consideration, 172–3 construction contracts, 230, 231, 236, 237–8 constructive trusts see also resulting trusts Birks, 97, 135 breach of confidence, 95 breach of trust, 96–7, 343, 344–5, 347, 349, 352, 354, 356–7

Index Canada, unjust enrichment, 93–7 cohabitational property, 94 equity, 93–4 contract: advance payments, 226 construction contracts, 231, 236, 237–8 failure to perform, 233–43 instalments and sale of land, 230–1, 235–6 consideration, 172–3 estoppel and, 323 fraud see fraud freedom to contract, 253 implied contracts, 135 inducing breach of contract, 187, 188–90 misrepresentation see misrepresentation negligence, 187 performance failure to perform, 233–43 rules, 227–33 substantial performance, 231, 233 work before payment, 228–33, 236 proprietary interests, restitution and, 187–92 quasi-contracts, 135, 251–2 Birksian theory, 257–65 complexity, 253–6 rescission bankruptcy and liquidation, 372–6 grounds, 180 misrepresentation, 371–2 unjust enrichment overlap, 179–80 voidable transactions, 368–90 swap contracts, 48, 142, 268, 277, 279 taxonomy, 159 Gaius, 430–1 unjust enrichment overlap, 167–83 ultra vires contracts, 362–7, 376–7 unjust enrichment overlap, 167–83 case law, 173–6 causa data causa non secuta, 172–6 forfeiture clauses, 176–7 formulations, 167–73 implied terms, 177–9 profit from wrongdoing, 181–2 public policy, 182 rescission, 179–80 Cooke, Elizabeth, 323, 325, 374 copyright, 192, 196 Cornish, William, 225 corrective justice, 43–5, 54, 185, 280–2 court orders: as remedies, 405–6, 419–20, 427–8 damages, 415–17, 433, 435 injunctions, 413–15 non-wrongful events, 405, 408–11 restitution orders, 417–19 substantive rights and, 411–13

455

Cownie, Fiona, 219 critical studies, 78 Dagan, Hanoch, 15, 51n22, 104, 123, 147–66, 282n80 damages: court orders, 415–17 exemplary damages, 88, 218 expectation damages, 99–100 taxonomy, 82 wrongs, 433, 435, 438 Dawson, John, 182 defences, Birksian approach, 64 Degeling, Simone, 16, 267–90 democracy, restitution by public authorities and, 314–18 deposits, 226, 388 design rights, 202–3 Dewey, John, 153 disenrichment, 41–2 disgorgement, 86, 87–8, 94 Drassinower, Abraham, 264–5 duress, 145, 270–1, 275, 292, 298, 302, 305, 311–13, 365 duty of care: statutory powers and, 372–3 two-stage approach, 65 Dworkin, Ronald, 107, 113–14, 116, 206–7 Edelman, J, 284, 285n95, 286 Elias, G, 93 emergencies, 268–9, 272–3, 276 England and Wales: Bill of Rights 1688, 271, 287, 304, 315, 318 breach of confidence, 194, 438–9 judicial approaches to restitution, 70–2 passing off, 198–9 policy-motivated unjust factors, 274 privacy rights, 193n46, 194, 202, 439 proprietary estoppel, 337 restitution from public authorities, 292–3, 298–306 mistake of law, 311 unjust enrichment, advance payments, 236–8, 243 equity: Canada, 91–2 constructive trusts, 93–4 equitable wrongdoing, 88, 93–4 fraud and, 371–2 gifts and, 382–3 promises, 97 taxonomy, 11, 79 US law, 69 estoppel: comparative estoppel, 328–9 detrimental reliance, 323–4 fault and, 325–30

456

Index

implied contracts, 437–8 limited remedial techniques, 330–3, 336 malleability of techniques, 333–7 moral framework, 325–30 promissory estoppel, 319, 337 proprietary estoppel, 94, 337 servitudes by estoppel, 322–3 shield or sword, 330–3 silence, 321–2 United States, 319–37 unreliability, 321–4 Evans, Williams, 172–3 exemplary damages, 88, 218 fiduciary duty, 88n35, 293, 340, 368–9 see also breach of trust Fish, Stanley, 133 fixtures, 254 forfeiture clauses, 176–7 Fratcher, W, 344–5 fraud: assignees, 369–76 Birksian taxonomy, 141 constructive trust, Canada, 97 contributory negligence, 328 estoppel and, 325 good faith purchasers, 370, 372, 373 proprietary claims, 365, 367–76 rescission of contract, 180 equitable right, 371–2 insolvency, 372–6 Friedmann, Daniel, 15, 169, 185–204 Fuller, Lon, 138, 248–9 Gaius, 2, 80, 424, 428–32 Gergen, Mark, 16, 51n22, 319–37 gifts: acceptance, 37–40 donative intent, 36–8, 64–5, 278 equity and, 382 improver cases, 260 incomplete gifts, 94 resulting trusts, 382–8 structure, 26 unjust enrichment and, 26, 35 voluntary participation, 34 Glover, John, 383–4, 394 Goff, Robert, 2, 6, 42n68, 44–5, 85, 169, 171, 188, 191n36, 225, 249n35, 250n46, 339 good faith purchasers: breach of trust, 341–2, 344–6, 348–50 fraud and, 370, 372, 373 goodwill, 197–200 Grantham, Ross, 1–18, 380, 387, 391–2, 393 Harding, Matthew, 349, 356 harm, 50–5

Hart, HLA, 148 Harwicke, Lord, 400 Hedley, Steve, 15–16, 205–21 Hegel, Georg, 27, 28 history, interpretivism and, 210–12 Holmes, Oliver, 149 Homer, 28 Honoré, Tony, 51–3, 54, 55, 56 improvements see mistaken improvements incidental benefits, 64 incontrovertible benefits, 40 indeterminacy of law, 148 injunctions, 413–15, 427 insolvency: assignees, 369–75 fraudulent transactions and, 369, 370, 371 rescission of contracts, 372–6 instrumentalism, 8, 218 intellectual property, 192–3, 195, 196–7, 202–3, 205 interpretation, process, 107 interpretivism: ambiguity, 208–10, 212 assessment, 210–20 constitutional objections, 220 empirical work and, 214–15 evaluative work and, 215 imperialistic interpretivism, 217–20 lawyers’ self-image and, 219–20 legal history and, 210–12 meaning, 206–8 methodological interpretivism, 212–17 obligations, 205–21 order and system, 213–14 interveners: legal hostility to, 272, 288n102 motivation, 276 intuition, 108–9 Ireland, resulting trusts, 393 Israel: industrial designs, 202–3 passing off, 199–200 privacy rights, 201 right of publicity, 201 Jaffey, Peter, 110 joint deposit accounts, 388 Jones, Gareth, 2, 6, 42n68, 44–5, 85, 169, 171, 188, 191n36, 225, 249n35, 250n46, 339 justice: corrective justice, 43–5, 54, 185, 280–2 injustice concept, 22–5 judicial flexibility, 89 multiculturalism and, 89–91 taxonomy and, 89 Justinian, Institutes, 2, 80, 121

Index Justitia, goddess, 90 Kant, Immanuel, 14, 44, 280–1, 282 Keener, William, 6 Kelsen, Hans, 138 Kortmann, J, 288n102 Krebs, Thomas, 72 Kull, Andrew, 251, 255–6, 265 La Forest, G, 296 laches, 295 legal education, 83 legal history, interpretivism and, 210–12 legal positivism see positivism legal principles: Birksian taxonomy and, 121–2 moral principles and, 118 taxonomy and, 107, 113–15, 116–19, 123, 124 legal realism see realism legal reasoning, shape, 131–4 legal responses: alignment with causative events, 89 taxonomy, 81, 82 lex ferenda, 439 Linnaeus, Carolus, 78 liquidation, rescission of contracts, 372–6 Llewellyn, Karl, 153, 160–1, 162 Louisiana, 68 McBride, Nicholas, 110n29 McCamus, John, 16, 170, 172, 182, 291–318 McInnes, Mitchell, 14, 77–101 McKendrick, Ewan, 22n5, 23n10, 179, 285 McLeod, Grant, 2 McMeel, Gerard, 167 MacQueen, Hector, 167, 168 Maddaugh, Peter, 170, 172, 182 Maitland, F, 342, 343, 344, 345 Mansfield, Lord, 168, 172, 227 Marx, Karl, 27n21 Meier, Sonja, 48, 59 Mercator, Gerardus, 78 misrepresentation: assignees, 369–76 Birks, 367–8 negligent mistatements, 206, 213, 330 proprietary claims, 367–76 rescission bankruptcy and liquidation, 372–6 equitable right, 371–2 voidable transactions, 368–9 third parties, 368 mistake of law, 271–2, 291, 292, 295, 311–13, 362 mistaken improvements: Birks, 16, 245, 250–1, 257–65 application of theory to, 260–1

457

evaluation of theory, 262–5 risk-taking, 260–1, 264 theoretical structure, 257–8 complexity, 253–6 fault, 265 improver cases, 249–51 quasi-contract cases, 251–2 statutory cases, 252–3 mistaken payments: Birksian paradigm, 8, 40, 53, 254, 263, 278 corrective justice, 281–2 good faith, 265 to public authorities, 269, 270–2, 279–80, 289 Air Canada, 291, 293–7, 301, 305–6, 308–9, 313, 316 Birks, 296–7, 298–303, 307, 311–13, 315, 317, 318 Canada, 291–318 democracy, 314–18 Kingstreet Investments, 298, 306–18 passing on defence, 92, 308–10 post-Air Canada, 298–306 Woolwich, 270–2, 279, 281, 287, 289, 303–7, 315, 316 Mitchell, C, 273, 276, 286 moral compulsion, 275–6 muddling through, 80 multiculturalism, rule of law and, 89–91 natural law, 207 necessity: burial, 272 emergencies, 268–9, 272–3, 276 salvage, 272–3, 275–6, 288 unjust enrichment and, 284–5 negligence: contract, 187 mistatements, 206, 213, 330 negotiorum gestio, 283–4 New Zealand: improver cases, 253n58, 253n59 unjust enrichment and, 362 Nolan, Richard, 342, 343 normative basis of restitution, 7–8, 21–45, 47–74 obligations: interpretivism, 205–21 taxonomy, 140–5, 321 unjust enrichment and, 34–43 O’Dell, Eoin, 17, 379–404 Oliphant, Herman, 162–3 Oxford Institute of Legal Practice, 3 Palmer, George, 182 parenthood, estoppel, 328 passing off, 198–200

458

Index

Peirce, Charles, 107n14 Perdue, William, 248–9 perfection, 94 performance of contracts see also specific performance failure to perform, advance payments, 233–43 rules, 227–33 substantial performance, 231, 233 work before payment, 228–33, 236 policy-motivated unjust factors see also ultra vires payments to public authorities Birksian view evolution, 298–304, 311–13 lack of basis model, 277–80 moral compulsion, 275–6 necessity, 273 payments pursuant to common liability, 286 private and public law, 317 burial cases, 272 instability, 269, 273–82 Birksian model, 277–80 corrective justice, 280–2 dominant model, 273–7 solutions, 283–90 limitless list of policies, 287–8 moral compulsion, 275–6 necessity, 268–9, 272–3, 276, 284–5 policy criteria, 288–90 rescue, 273, 276, 282, 285, 288 residual category, 275 salvage, 272–3, 275–6, 288 solutions recasting as vitiated intention, 286 restitution without unjust enrichment, 283–5 system-wide policy location, 286–90 taxonomy, 283–6 Pomponius, 49 positivism: autonomy of law, 149 Birks, 136, 145, 147 interpretivism and, 207 legal principles and, 113, 114 posited rules, 105–6 taxonomy and, 123–5, 147 power, legal realism, 149–50 Praetor’s Edict, 80 principles see legal principles privacy: breach of confidence, 438–9 Israel, 201 UK Human Rights Act, 193n46, 194, 202, 439 private law: corrective justice and, 54, 280 downgrading, 205, 221

place of restitution in, 9–11 public-private distinction, 158–9 taxonomy see taxonomy privity, 33, 190 product liability, 165 promises, 97, 289 proprietary claims: Birks and misrepresentation, 367–76 Birks and ultra vires contracts, 362–7, 376–7 proprietary estoppel, 94 proprietary rights: enforceability against third parties, 191–2 restitution and, 186–92 taxonomy, 160 trusts, 342 public authorities: democracy and restitution from, 314–18 fiduciary obligations, 293 mistaken payments to, 269, 270–2 Air Canada, 291, 293–7, 301, 305–6, 308–9, 313, 316 Birks, 296–7, 298–303, 317 Canada, 291–318 Kingstreet Investments, 298, 306–18 post-Air Canada, 298–306 Woolwich, 270–2, 279, 281, 287, 289, 303–7, 315, 316 public law: public-private distinction, 158–9, 317 rise, 205 public policy, 182, 218 see also policy-motivated unjust factors publicity, right to, 200–2 punitive damages, 88, 218 pure economic loss, 56, 61 quasi-contracts, 135, 251–2, 257–65 Rawls, John, 123n78 realism: American legal realism, 6, 91, 148–53 coercion and reason, 149–51 cynicism and, 78 dynamics of law, 152–3, 160–2 interpretivism and, 207–8 non-positivism, 148 rule-oriented realism, 156–7 science and craft, 149, 151–2 taxonomy and, 104, 147–8 dynamism, 160–2 functions of taxonomy, 154–60 inter-category relations, 163–6 narrow categories, 162–3 realist taxonomies, 160–6 tensions of law, 149 tradition and progress, 149, 152–3 registration of land, Australia, 340, 349, 355–9

Index remedies: Birksian view, 421–3 court orders as, 405–6, 419–20, 427–8 damages, 415–17, 433, 435 injunctions, 413–15, 427 meaning, 423–8 restitution orders, 417–19 rights and, 406–8 wrongs and, 408–11, 421, 428–39 rescue, 273, 276, 282, 285, 288 restitution: Birks’ unfinished business, 7–13 breach of trust see breach of trust Canada, unjust enrichment and, 97–100 creation of entitlements considerations, 192–5 examples, 196–203 fresh news, 196–7 passing off, 197–200 right of publicity, 200–2 in specie, 94, 347–51 new subject, 5–7 normative basis, 7–8, 21–45, 47–74 obligation-creating conditions, 34–43 orders, 417–19 place in private law, 9–11 proprietary interests, 186–92 remedial category, 185 response to legal rights, 103–4 resulting trusts see resulting trusts structure of claims, 57–66 without unjust enrichment, 283–5 resulting trusts see also constructive trusts automatic resulting trusts, 391–2 Birks, 379–81, 391, 393, 400, 404 Chambers, 379–81, 391, 393, 394–404 characteristics, 381–94 common structures, 389–94 failed trusts, 389 gifts and, 382–8 joint deposit accounts, 388 presumed trusts or, 387, 390, 391–2, 396 unjust enrichment and, 86, 94, 394–402 growing judicial support, 401–2 Rickett, Charles, 1–18, 206, 207, 208, 209, 210–11, 213, 216, 217–19, 380, 387, 391–2, 393 rights: remedies and, 406–8, 426–8 substantive rights, 411–13 taxonomy, 82 risk: risk-taking, 260–1, 264 voluntary assumption, 288 Roman law: Birks and, 2, 3, 5, 80, 135, 412, 428–32 causa data causa non secuta, 172–6 condictio indebiti, 71, 72, 363

459

Honoré, 56 taxonomy, 80 rule of law, multiculturalism and, 89–91 sale of goods, 205, 228, 229, 366 salvage, 81, 272–3, 275–6, 288 Samuel, Geoffrey, 155–6 Scots law, 2 Scott, Struan, 16, 245–66 Selden, John, 84 semiotics, 133–4 servitudes, by estoppel, 322–3 Sherwin, Emily, 14–15, 103–26 Smith, L, 51n20, 169, 280, 281–2 Smith, Stephen, 17, 110n29, 154, 206, 207–9, 210, 211–12, 215, 405–20 social policy, 100, 218 Society of Legal Scholars, 3 specific performance, 97, 409–10, 411, 413–14, 416, 423, 426–7, 434–5, 438 stare decisis, 85 Stevens, Andrew, 179 strict liability, 87, 99, 186, 226, 259 subjective devaluation, 34, 40, 41, 250n47 Sutton, Richard, 15, 127–45 Swadling, William, 365, 367–70, 380, 397, 401n124, 403 swap contracts, 48, 142, 268, 277, 279 taxation: constitutional principle, 287 democracy and, 314–18 duress, 270–1, 292, 298, 302, 305, 311–13 mistaken payments, 269, 270–2, 279–80, 289 Air Canada, 291, 293–7, 301, 305–6, 308–9, 313, 316 democracy, 314–18 Kingstreet Investments, 306–18 passing on defence, 92, 295, 306, 308–10 Woolwich, 270–2, 279, 281, 287, 289, 303–7, 315, 316 taxonomy: Birks, 78–91, 99, 103–5 causative events see causative events contract and unjust enrichment, 169, 170, 171–2, 173, 179–80 court orders as remedies, 406–13, 419–20 criteria, 109–10, 111, 115 debate, 140, 148 descriptive v normative, 122–3, 211 evolution, 139 formal classification, 121–3 function of taxonomy, 154 influence, 139

460

Index

interpretivist critique, 211–12 law of obligations, 141, 321 legal principles, 121–2 order and knowledge, 268 positivism, 125, 147 purposes of classification, 115 remedies, 421–3 structure, 257–8 substantive rights, 411–13 unjust enrichment, 104, 122, 268–9 wrongs and not-wrongs, 257, 421–2, 432–7 Canadian Supreme Court, 91–100 contradictions, 91–2 equity, 91–2 social policy, 100 unjust enrichment and restitution, 97–100 unjust enrichment and resulting trusts, 93–7 cartography analogy, 78, 154–5 criteria, 108–15 descriptive v normative, 111, 122–3 evolutionary history, 109 formal classification, 109–11, 120, 124 hierarchy, 110 intuition, 108–9, 125 legal principles, 113–15, 116–19, 123, 124 purposive classification, 110–11 reason-based, 111–15, 120–1, 123, 125–6 debate, 148 dynamics, 140–5 functions, 84–91 accessibility, 85 alignment of events and responses, 89 anomalies and gaps, 87–8 legal realism, 154–60 multiculturalism and rule of law, 89–91 similarities and differences, 85–6 Gaius, 424, 428–32 interpretivism, 206–8 issues, 14–16 legal realism and, 104, 147–8 dynamism, 160–2 functions of taxonomy, 154–60 inter-category relations, 163–6 narrow categories, 162–3 realist taxonomies, 160–6 linguistic taxonomy, 119–20 muddling through and, 80 need for, 83–4 obligations, 140–5 policy-motivated unjust factors, 283–6 positivism and, 123–5, 147 private law, 9–11 public-private distinction, 158–9 purposes, 115–21

court guidance, 115–19 legal communication, 119–20 questions, 105–21 criteria, 108–15 purposes, 115–21 subject matter, 105–8 restitution, remedial category, 185 Roman law, 80 subject matter, 105–8 attributed rules, 106–7 ideal rules, 106 posited rules, 105–6, 123–4 unjust enrichment, 81, 104 contract overlap, 167–83 improver cases, 265 Tettenborn, Andrew, 179 Thomas, JAC, 2 Tilbury, Michael, 17–18, 421–39 Tolhurst, GJ, 240 torts: creation of entitlements, 185 taxonomy, 159 waiver, 188, 191 tracing, 186, 346–7, 369 trade secrets, 194–5 Treitel, Günter, 181, 237 trover, 371 trusts: apparently failed, 389 breach see breach of trust constructive trusts see constructive trusts fiduciary duty, 88n35, 293, 340, 368–9 resulting trusts see resulting trusts Twain, Mark, 220 ultra vires contracts: Birks, 362–7 proprietary claims, 376–7 ultra vires payments to public authorities: Air Canada, 291, 293–7, 301, 305–6, 308–9, 313, 316 Birks, 296–7, 298–303, 307, 311–13, 315, 317, 318 Canada, 291–318 democracy, 314–18 Kingstreet Investments, 298, 306–18 passing on defence, 92, 308–10 post-Air Canada, 298–306 unjust enrichment, 269–72, 279–80, 289 Woolwich, 270–2, 279, 281, 287, 289, 303–7, 315, 316 unconscionable conduct, 143, 250, 256, 438 United States see also American Law Institute approaches to restitution, 68–70, 72 breach of confidence, 194–5 breach of trust, 343 estoppel, 319–37 intangibles and restitution, 196–7

Index legal realism, 6, 91, 148–53 Louisiana, 68 right of publicity, 200–1 taxonomy, 104, 121 unjust enrichment: acceptance, 37–40 Birks see Birks, Peter civilian approaches, 13, 47–8, 58–60, 139n49, 143, 225–6, 277–80 claims see unjust enrichment claims common law, moral rationality, 57–8 contract overlap, 167–83 case law, 173–6 causa data causa non secuta, 172–6 forfeiture clauses, 176–7 formulations, 167–73 implied terms, 177–9 profit from wrongdoing, 181–2 public policy, 182 rescission, 179–80 corrective justice, 43–5, 185, 280–2 creation of entitlements considerations, 192–5 examples, 196–203 debate, 11–13, 21 defining grounds, 64 direct enrichment, 33 donative intent, 36–8, 41–2, 64–5, 278 dynamic principle, 23 harmless gains, 50–1 improvement see mistaken improvements incontrovertible benefits, 40 issues, 16–18 loss-related gains, 51–5 mistaken payments see mistaken payments moral starting point, 48–56 Canada, 66–8, 72 England and Wales, 70–2 liability and, 55–6 prognosis, 66–72 structure of claims, 57–66 United States, 68–70, 72 non-gifts, 26

461

obligation-creating conditions, 34–43 organisation of positive and negative reasons, 60–3 parties’ behaviour, 260–1, 263–4 policy motivation see policy-motivated unjust factors principle, 21–7 quasi-contract cases, 251–2, 257–65 restitution and, Canada, 97–100 restitution without, 283–5 resulting trusts see resulting trusts scope of concept, 49 search for doctrine, 246–9 structure, 26–7 taxonomy see taxonomy transfers of value, 29–34 wrongs and, 87 unjust enrichment claims: Canadian approaches, 66–8 England and Wales, 70–2 proprietary see proprietary claims structure and starting point, 57–66 US approaches, 68–70 value: juridical significance, 27–9 subjective devaluation, 34, 40, 41, 250n47 transfers of value, 29–34 Virgo, Graham, 60–1, 169, 250n46, 275n47 Waddams, Stephen, 15, 167–83, 215 waiver of torts, 188, 191 Waters, D, 93 Watts, Peter, 17, 48, 362–78 Weinrib, Ernest, 14, 21–45, 55, 159n53, 280–1 Wonnell, C, 51n22 Worthington, Sarah, 401 wrongs: equitable wrongdoing, 88, 93–4 not-wrongs and, 257, 421–2, 432–9 remedies and, 408–11, 421, 428–30 Zabrzewski, Rafael, 412, 426, 427