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Restitution for Wrongs: A Structural Analysis

Published online by Cambridge University Press:  20 July 2015

Francesco Giglio
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Extract

In this essay, I seek to provide an account of the scope and justification of gain-based damages for civil wrongs. My starting point is that the main accounts of restitution for wrongs are inconsistent with the structure of the law of damages. My alternative explanation provides a framework which is coherent with the law of obligations and allows a reading of restitution for wrongs in terms of corrective justice. When a wrong affects a proprietary or proprietary-like interest, I argue that the normal response is compensation, not restitution. In this context, I introduce the expression ‘pseudo-restitutionary damages’ to identify those awards in which the claimant’s loss is measured by the defendant’s gain. The true nature of pseudo-restitutionary damages is revealed by their close link to the loss. When the loss disappears, the benefit disappears with it. Unlike pseudo-restitution, proper restitution for wrongs requires a benefit which is independent of the loss and is only connected to the wrong. The benefit cannot be dissociated from the claimant’s loss if it is the consequence of a wrongful direct transfer of wealth from the claimant to the defendant. Corrective justice can account for proper restitutionary damages. It provides a normative ground for the victim to seize the defendant’s gain independently of any loss suffered by the victim. It isolates the wrongdoer and the victim as the parties to a restitutionary claim. The award is granted because it would be unjust if the wrongdoer would go scot-free with his wrongful gains; and it is granted to the victim because any wrongful behaviour is detrimental to the sufferer of the injustice. Although quite distinct, compensation and restitution for wrongs show certain structural similarities. The former aims to place the victim in the same position in which the victim was before the damaging event took place; the latter seeks to place the wrongdoer in the same position in which the wrongdoer was before he performed the wrongful act. Both legal responses aim at neutrality as between the pre- and post-wrong position but in respect of different parties.

Type
Research Article
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Canadian Journal of Law & Jurisprudence , Volume 20 , Issue 1 , January 2007 , pp. 5 - 34
Copyright
Copyright © Canadian Journal of Law and Jurisprudence 2007

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References

I am grateful to Kit Barker, David Booton, Richard Bronaugh, Neil Duxbury, Dennis Klimchuk, John Murphy, Stephen Waddams, and unknown referees for their comments on earlier drafts of this paper.

1. Smith, L.D., ‘The Province of the Law of Restitution’ (1992) 71 Can. Bar Rev. 672 at 684Google Scholar.

2. Ibid. at 692.

3. Edelman, J., Gain-Based Damages (Oxford: Hart, 2002) at 82.Google Scholar

4. Birks, P., Unjust|Enrichment, 2nd ed. (Oxford: Oxford University Press, 2005) at 11.Google Scholar

5. For an analysis of the structure of the claim in unjust and unjustified enrichment see Giglio, F., ‘A Systematic Approach to “Unjust” and “Unjustified” Enrichment’ (2003) 23 Oxford J. Legal Stud. 455 CrossRefGoogle Scholar.

6. E.g., Burrows, A., ‘Quadrating Restitution and Unjust Enrichment: A Matter of Principle?’ (2000) 8 Restitution L. Rev. 257 Google Scholar; Samuel, G., ‘English Private Law: Old and New Thinking in the Taxonomy Debate’ (2004) 24 Oxford J. Legal Stud. 335 CrossRefGoogle Scholar.

7. See the judicial decisions which follow. In the literature, there are different evaluations of the nature of the award. For two opposite approaches see J. Edelman, supra note 3, and Sharpe, R.J. & Waddams, S.M., ‘Damages for Lost Opportunity to Bargain’ (1982) 2 Oxford J. Legal Stud. 290 CrossRefGoogle Scholar.

8. Wrotham Park Estate Co Ltd v. Parkside Homes Ltd. [1974] 1 WLR 798 (Ch Div) [Wrotham Park].

9. E.g., Surrey CC and Mole DC v. Bredero Homes [1993] 1 WLR 1361 (CA); Severn Trent Water Ltd. v. Barnes [2004] EWCA 570 (CA); Horsford v. Bird [2006] UKPC 3 (PC).

10. Jaggard v. Sawyer [1995] 1 WLR 269 (CA). See, e.g., Sir Thomas|Bingham, MR: ‘I cannot … accept that Brightman J.’s assessment of damages in Wrotham Park was based on other than compensatory principles’ (281). And then the Court of Appeal in Severn Trent, previous note, which, following the lower court, awarded a post of damages for the lost opportunity to bargain. But see Lord Nicholls in A-G v. Blake [2001] AC 268 (HL) 283 [Blake], who thought that the ‘Wrotham Park case … shines, rather as a solitary beacon, showing that in contract as well as tort damages are not always narrowly confined to recoupment of financial loss’, meaning that it is a case of restitutionary damages.

11. Sharpe & Waddams, supra note 7.

12. The lost opportunity to bargain doctrine applies a model of assessment which can be found in many European legal systems: for instance in Germany (1958) BGHZ 26 349 (Herrenreiter case), and in Italy Cass. 6th February 1993 No 1503, [1995] Foro italiano I 1617 (Bartali case).

13. Birks, P., ‘Profits of Breach of Contract’ (1993) 109 L. Q. Rev. 518 Google Scholar; Virgo, G., The Principles of the Law of Restitution, 2nd ed. (Oxford: Oxford University Press, 2006) 482 CrossRefGoogle Scholar; Burrows, A., The Law of Restitution, 2nd ed. (London: Butterworths, 2002) at 482–83 Google Scholar; Edelman, supra note 3 at 99-102.

14. A-G v. Blake, supra note 10 at 279 (Lord Nicholls).

15. WWF v. WWF [2006] EWHC 184 (Ch) at para. 137.

16. Aysha Mohammed Murad and Layla Mohammed Murad v. Hashim Ibrahim Khalil Al-Saraj and Westwood Business Inc. (2004) WL 1174247. This case has been examined by the Court of Appeal in [2005] EWCA Civ 959. Although the appeal judgment does not affect the point made here, it touches upon an important issue which will be considered later.

17. Ibid. at para. 342.

18. Although recent judicial decisions indicate that the doctrine of lost opportunity to bargain still has a role to play. See Lane v. O’Brien Homes [2004] EWHC 303 (QB); and WWF v. WWF, supra note 15.

19. McGregor, H. McGregor On Damages, 17th ed. (London: Sweet & Maxwell, 2003) at para. 12-002Google Scholar.

20. Edelman, supra note 3 at 65-78.

21. A-G v. Blake [1998] 1 All ER 833 (CA) 845 (Lord Woolf MR).

22. A-G v. Blake (HL), supra note 10.

23. Ibid. at 285 (Lord Nicholls).

24. Ibid.

25. Lord Steyn prefers to speak of a ‘pragmatic’ approach, ibid. at 291. See also Burrows’s comment, supra note 13 at 487: ‘as to when such an order should be made, [Lord Nicholls’s] speech … relies heavily on this being at the discretion of the court.’

26. Blake, supra note 10 at 284.

27. Murad v. Al Saraj, supra note 16.

28. Burrows, supra note 13 at 384.

29. For instance s. 61 (1) of the Patent Act 1977; s. 96 (2) of the Copyright, Designs and Patents Act 1988.

30. Livingstone v. The Rawyards Coal Company (1880) 5 AC 25 (HL) at 39 (Lord Blackburn) [Livingstone].

31. My Kinda Town Ltd. v. Soll [1982] 8 FSR 147 at 156.

32. In WWF v. WWF, supra note 15 at para. 122, Peter Smith J observed that ‘the difference in some cases between a claim for damages on the Wrotham principle and account of profits can be very fine.’

33. Virgo, supra note 13 at 436, states: [t]his remedy is clearly restitutionary, since it requires the defendant’s gain to be ascertained and transferred to the victim of the wrong.’ On similar lines, Burrows, supra note 13 at 466.

34. McGregor, supra note 19 at para. 12-006.

35. Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com 247, 1997) Part III para. 3.1.

36. Whitwham v. Westminster Brymbo Coal and Coke [1896] 2 Ch 538 (CA). The point is contentious. For example, Burrows, supra note 13 at 469, states: ‘there are passages in the judgments supporting a restitutionary interpretation.’ On the concept of way-leave see infra note 46. In my view, this is another example of a pseudo-restitutionary response.

37. In his famous speech on exemplary damages in Rookes v. Barnard [1964] AC 1129 (HL) 1226-1227, Lord Devlin mentioned cases ‘in which the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff.’

38. E.g., Jaffey, P., The Nature and Scope of Restitution (Oxford: Hart, 2000) 375, n. 61Google Scholar; Edelman, supra note 3 at 66; Virgo, supra note 13 at 439.

39. Edelman, supra note 3 at 67. In fairness, it has to be said that Edelman implicitly rejects the approach which I propose. His statement carries on: ‘… even though the claimant may not have suffered any financial loss.’

40. For the sake of clarity, it is repeated that the central thesis advanced here purports the absence of any restitutionary claim based upon the wrong in this context, not only of a claim which is limited to £70.

41. Analysing Edwards v. Lee’s Administrator, 265 Ky 418, 96 SW 2d 1028 (1936), a well-known way-leave case, Waddams, S., Dimensions of Private Law (Cambridge: Cambridge University Press, 2003) at 112 CrossRefGoogle Scholar, observes that ‘[t]he court’s conclusion was plainly influenced … by the concepts that the defendant had taken something that belonged to the plaintiff’ (emphasis added).

42. It cannot be excluded that other legal responses might be available in this case. Thus, a legal system might protect ownership establishing that the violation of a proprietary interest gives rise to exemplary damages. But this approach would be seen as exceptional in English law and in many other legal systems.

43. See the next section for a theoretical explanation of this mechanism.

44. (1895) RGZ 35 at 63.

45. This point, which seems to have been rejected by the House of Lords in Blake (see supra note 10) will be examined during the discussion of the fourth statement.

46. Whitwham v. Westminster Brymbo, supra note 36 at 541-42.

47. Lane v. O’Brien, supra note 18.

48. WWF v. WWF, supra note 15, para. 146.

49. Weinrib, E., ‘Punishment and Disgorgement as Contract Remedies’ (2003) 78 Chi.-Kent L.R. 55 Google Scholar. This article considers restitution for wrongs in the context of contractual damages. Weinrib, presented his general theory two years earlier in the seminal article ‘Restitutionary Damages as Corrective Justice’ 1 (2000) Theoretical Inquiries in Law 1 Google Scholar.

50. Weinrib (2000), ibid. at 3.

51. Ibid. at 11.

52. Ibid. at 13.

53. Ibid. at 37.

54. Weinrib (2003), supra note 49 at 80.

55. Weinrib (2000), supra note 49 at 12.

56. Ibid. at 6, n. 6.

57. Livingstone v. The Rawyards Coal Company, supra note 30 at 39.

58. In the next section, discussing my third proposition I shall provide the normative backing to this statement.

59. My assumption that restitutionary damages are linked to the wrong without the mediation of a loss seems to be contradicted by Ministry of Defence v. Ashman (1993) 66 P & CR 195 (CA) [Ashman. This case will be discussed later on. At this stage, it is enough to point out that one judge qualified the legal response granted to the victim as restitutionary damages although the loss was triggered by the violation of a proprietary interest of the claimant. Yet, this view was not shared by the other members of the court. Therefore, it is doubtful whether Ashman really contradicts the first two propositions.

60. Mohammed Murad and Layla Mohammed Murad v. Hashim Ibrahim Khalil Al-Saraj and Westwood Business Inc. [2005] EWCA Civ 959 (CA) [Murad].

61. Regal (Hastings) v. Gulliver [1967] 2 AC 134 (HL).

62. Murad (CA), supra note 60 at para. 67.

63. Smith, supra note 1 at 686, observes: ‘The point is to take away the gain realized by the defendant via the wrong.’ I agree with this statement.

64. Murad (CA), supra note 60 at para. 82.

65. Ibid. at para. 141.

66. Blake, supra note 10.

67. Weinrib (2003), supra note 49 at 75: ‘the English disgorgement cases [do not succeed] in showing the promisee’s particular entitlement to the gain that the promisor is made to disgorge.’

68. Weinrib (2000), supra note 49 at 7.

69. Aristotle, , The Nicomachean Ethics of Aristotle, trans. by Browne, R.W. (London: Henry Bohn, 1850) at V ivGoogle Scholar.

70. Ibid.

71. Coleman, J., Risks and Wrongs (Cambridge: Cambridge University Press, 1992) at 371 Google Scholar.

72. Ibid.

73. E.g., Coleman, supra note 71 at 370.

74. Cicero, de officiis 3.5.21., was one of the first lawyers to make the moral case for the prohibition. Many passages in the Digest confirm that the lawyers were well aware of the role which the prohibition played in the legal system. The most famous among them must be Pomponius’s view in D. 50. 17. 206: ‘Iure naturae aequum est neminem cum alterius detrimento et iniuria fieri locupletiorem’ (By natural law it is equitable that nobody become richer to the detriment and by the injury of another).

75. Zimmermann, R., The Law of Obligations: Roman Foundations of the Civilian Tradition (Cape Town: Juta, 1990) at 852 Google Scholar, Frezza, P., Review of Santoro: ‘Studi sulla condictio’ (1972) XXXVIII Studia et Documenta Historiae et Iuris 345 at 352Google Scholar.

76. Gordley, J., ‘Tort Law in the Aristotelian Tradition’ in Owen, D.G., ed., Philosophical Foundations of Tort Law (Oxford: Clarendon Press, 1995) 131 at 139Google Scholar.

77. On the loss of a chance, see Chaplin v. Hicks [1911] 2 KB 786 (CA) (breach of contract); Allied Maples Group Ltd. v. Simmons & Simmons [1995] 1 WLR 1602 (CA) (professional negligence); Gregg v. Scott [2005] 2 AC 176 (HL).

78. Cassell & Co. Ltd. v. Broome [1972] AC 1027 (HL) 1070. His Lordship was quoting McGregor’s view which this author had sustained until he changed his mind in the present edition of his work on damages. See supra note 19.

79. Coleman, supra note 71 at 370-71.

80. Weinrib (2000), supra note 49 at 36.

81. Ibid. at 27.

82. Thus Lord Woolf MR in Thompson v. Metropolitan Commissioner [1998] QB 489 (CA).

83. The late Professor Birks has provided the clearest exposition of this civilian theory, adapting it to English law. He called his model ‘event-based classification’; cf. Birks, supra note 4 at 21-28.

84. Ibbetson, D.J. opens his A Historical Introduction to the Law of Obligations (Oxford: Oxford University Press, 1999) at 1 Google Scholar, with the observation that ‘[t]he Common law of obligations grew out of the intermingling of native ideas and sophisticated Roman learning.’

85. Rookes v. Barnard, supra note 37 at 1226 (Lord Devlin).

86. Ibid.

87. Edelman, supra note 3 at 83-86; see also Fox, D., ‘Restitutionary Damages to Deter Breach of Contract’ (2001) 60 Cambridge L. J. 33 CrossRefGoogle Scholar at 33-35. A more extreme position, which links restitution to punishment, is advocated by Gergen, M.P., ‘What Renders Enrichment Unjust?’ (2001) 79 Texas L. Rev. 1927 Google Scholar. In the judiciary, see Lord Hobhouse, dissenting, in Blake, supra note 10 at 295, according to whom the restitutionary claim would have ‘essentially punitive nature’.

88. Tettenborn, A., ed., The Law of Damages (London: Lexis-Nexis UK, 2003) at paras. 1.40-1.41Google Scholar.

89. In the similar context of an award of money had and received Burrows, supra note 13 at 464, writes that ‘it is at least strained to regard the measure of recovery as corresponding to the claimant’s loss and it is more natural … to regard the measure as solely concerned to strip the tortfeasor of … the gains made by the tort.’

90. Weinrib would say that my loss consists in the deprivation of the possibility of gain which is an element of my right violated by you. See Weinrib (2000), supra note 49 at 13.

91. Murad (CA), supra note 60.

92. Ibid. at para. 59 (Arden LJ).

93. Ibid. at para. 137.

94. Ashman, supra note 59.

95. Ibid. at 200-01 (Hoffmann LJ).

96. Ibid. at 202.

97. E.g., Virgo, supra note 13 at 465: ‘It is now clear that restitutionary remedies are available where the defendant has trespassed on the claimant’s land.’

98. As Lord Nicholls put it in Blake, supra note 10 at 278 referring to the so-called way-leave cases: ‘compensation for the wrong done to the plaintiff is measured by a different yardstick.’ The same line of reasoning can be applied to decisions which follow closely Ashman, for instance Ministry of Defence v. Thompson [1993] 2 EGLR 107 (CA).

99. Denning L.J. followed a similar avenue in Strand Electric & Engineering Co. v. Brisford Entertainments [1952] 2 QB 246 (CA) at 255, observing that a claim brought following the violation of a proprietary interest was more similar to ‘an action for restitution’ than a tortious action.

100. Tang Man Sit v. Capacious Investments Ltd. [1996] AC 514 (PC) at 521 (Lord Nicholls).

101. Law Commission, supra note 35 at para. 3.70.

102. Livingstone, supra note 30.

103. Birks, ‘Inconsistency between Compensation and Restitution’ (1996) 112 L. Q. Rev. 375 at 378Google Scholar.

104. Law Commission, supra note 35 at para. 3.67.

105. Tang Man Sit v. Capacious Investments Ltd., supra note 100.

106. Ibid. at 521.

107. Ibid. at 520.

108. In the context of profits derived from wrongdoing, Waddams, supra note 41 at 122, observes that ‘[considerations of public policy have also played an important role.’