Restitution and unjust enrichment
Restitution and unjust enrichment is the field of law relating to gains-based recovery. In contrast with damages (the law of compensation), restitution is a claim or remedy requiring a defendant to give up benefits wrongfully obtained. Liability for restitution is primarily governed by the "principle of unjust enrichment": A person who has been unjustly enriched at the expense of another is required to make restitution.[1]
"Restitution" redirects here. For other uses, see Restitution (disambiguation).
This principle derives from late Roman law, as stated in the Latin maxim attributed to Sextus Pomponius, Jure naturae aequum est neminem cum alterius detrimentum et injuria fieri locupletiorem[2] ("By natural law it is just that no one should be enriched by another's loss or injury"). In civil law systems, it is also referred to as enrichment without cause or unjustified enrichment.
In pre-modern English common law, restitutionary claims were often brought in an action for assumpsit and later in a claim for money had and received. The seminal case giving a general theory for when restitution would be available is Lord Mansfield's decision in Moses v Macferlan (1760), which imported into the common law notions of conscience from English chancery.[a] Blackstone's Commentaries also endorsed this approach, citing Moses.[3]
Where an individual is unjustly enriched, modern common law imposes an obligation upon the recipient to make restitution, subject to defences such as change of position and the protection of bona fide purchasers from contrary equitable title. Liability for an unjust enrichment arises irrespective of wrongdoing on the part of the recipient, though it may affect available remedies. And restitution can also be ordered for wrongs (also called "waiver of tort" because election of remedies historically occurred when first filing a suit). This may be treated as a distinct basis for restitution, or it may be treated as a subset of unjust enrichment.
Unjust enrichment is not to be confused with illicit enrichment, which is a legal concept referring to the enjoyment of an amount of wealth by a person that is not justified by reference to their lawful income.
History[edit]
Roman law[edit]
In civil law systems, unjust enrichment is often referred to as unjustified enrichment. Its historical foundation of enrichment without cause can be traced back to the Corpus Iuris Civilis.[4] While the concept of enrichment without cause was unknown in classical Roman law,[5] Roman legal compilers eventually enunciated the principle of unjustified enrichment based on two actions of the classical Roman period—the condictio and the actio de in rem verso.[4]
The condictio authorized recovery by the plaintiff of a certain object or money in the hands of the defendant. The defendant was considered a borrower who was charged with returning the object or money.[6] For the actio de in rem verso, the plaintiff bore the burden of specifying the cause for his demand, namely, demanding the restitution of assets that had exited the plaintiff's patrimony and entered the defendant’s patrimony through the acts of the defendant’s servants.[7]
The coherent concept of unjustified enrichment then appeared in the Justinian Code, based on Roman pragmatism with equitable considerations and moral principles of Greek philosophy.[4] In the Justinian Code, condictiones were grouped into categories, such as when the plaintiff had given a thing or money:[4]
Imagine that A commits a wrong against B and B sues in respect of that wrong. A will certainly be liable to pay compensation to B. If B seeks compensation then the court award will be measured by reference to the loss that B has suffered as a result of A's wrongful act. However, in certain circumstances it will be open to B to seek restitution rather than compensation. It will be in B's interest to do so if the profit that A made by his wrongful act is greater than the loss suffered by B. Or in some circumstances, the lost good "G" carries more value to B than the actual cost of "G". For example, suppose B possesses a rare book from the 14th century (G), which cost only Rs 10 in that period. A has illegally stolen G (from B) and has destroyed it. Currently very few samples of G exist in the world, yet since its demand is not much, G still costs Rs 10. Since very few samples exist in the world, it is near impossible to find a person from whom G could be bought. In such a circumstance, B is entitled to get Rs 10 from A under the law of torts. However, B might prefer to apply law of restitution instead (waiver of torts), and claim that he needs a copy of G rather than Rs 10.
Whether or not a claimant can seek restitution for a wrong depends to a large extent on the particular wrong in question. For example, in English law, restitution for breach of fiduciary duty is widely available but restitution for breach of contract is fairly exceptional. The wrong could be of any one of the following types:
Note that 1–5 are all causative events (see above). The law responds to each of them by imposing an obligation to pay compensatory damages. Restitution for wrongs is the subject which deals with the issue of when exactly the law also responds by imposing an obligation to make restitution.
In Attorney General v Blake,[22] an English court found itself faced with the following claim. The defendant had made a profit somewhere in the region of £60,000 as a direct result of breaching his contract with the claimant. The claimant was undoubtedly entitled to claim compensatory damages but had suffered little or no identifiable loss. It therefore decided to seek restitution for the wrong of breach of contract. The claimant won the case and the defendant was ordered to pay over his profits to the claimant. However, the court was careful to point out that the normal legal response to a breach of contract is to award compensation. An order to make restitution was said to be available only in exceptional circumstances.
National systems[edit]
Australia[edit]
Whether there is a distinct body of law in Australia known as the law of unjust enrichment is a highly controversial question. In Pavey & Mathews v Paul (1987) 162 CLR 221 the concept of unjust enrichment was expressly endorsed by the High Court of Australia. This was subsequently followed in numerous first instance and appellate decisions, as well as by the High Court itself.
Considerable skepticism about the utility of the concept of unjust enrichment has been expressed in recent years. The equitable basis for the action for money had and received has instead been emphasised and in Australian Financial v Hills [2014] HCA 14 the plurality held that the concept of unjust enrichment was effectively 'inconsistent' with the law of restitution as it had developed in Australia. It is worth noting that the analytic framework had been expressly endorsed by the High Court just two years before in Equuscorp v Haxton [2012] HCA 7. For the moment, the concept of unjust enrichment appears to serve only a taxonomical function.[23]
Belgium[edit]
The reception of unjust enrichment into Belgian law has been upheld multiple times by the Court of Cassation, which has ruled that unjust enrichment is a general principle of law.[24][25][26] The Court has stated that the legal basis for unjust enrichment is equity (ius aequum).
According to the Court, five elements constitute unjust enrichment: