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
viii
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
xiv
Table of Cases
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
th
Table of Cases
xv
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
xvi
Table of Cases
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
Table of Cases
xvii
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
xviii
Table of Cases
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
Table of Cases
xix
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
xx
Table of Cases
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
Table of Cases
xxi
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
xxii
Table of Cases
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
Table of Cases
xxiii
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
nd
xxiv
Table of Cases
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
th
th
th
th
th
th
Table of Cases
xxv
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
th
nd
th
st
th
Table of Legislation TABLE OF LEGI S LATI ON
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
xxviii
Table of Legislation
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
Table of Legislation
xxix
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
xxx
Table of Legislation
§ 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.
2
Ross Grantham and Charles Rickett
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).
4
Ross Grantham and Charles Rickett
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
6
Ross Grantham and Charles Rickett
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.
Unjust Enrichment—Reason, Place and Content
7
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
8
Ross Grantham and Charles Rickett
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.
Unjust Enrichment—Reason, Place and Content
9
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).
10
Ross Grantham and Charles Rickett
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.
Unjust Enrichment—Reason, Place and Content
11
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
12
Ross Grantham and Charles Rickett
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.
14
Ross Grantham and Charles Rickett III
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
16
Ross Grantham and Charles Rickett
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).
Unjust Enrichment—Reason, Place and Content
17
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.
18
Ross Grantham and Charles Rickett
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
22
Ernest J Weinrib
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.
The Normative Structure of Unjust Enrichment
23
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.
24
Ernest J Weinrib
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.
The Normative Structure of Unjust Enrichment
25
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.
26
Ernest J Weinrib
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
The Normative Structure of Unjust Enrichment
27
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).
28
Ernest J Weinrib
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.
The Normative Structure of Unjust Enrichment
29
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
30
Ernest J Weinrib
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
The Normative Structure of Unjust Enrichment
31
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
32
Ernest J Weinrib
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
The Normative Structure of Unjust Enrichment
33
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).
34
Ernest J Weinrib
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
The Normative Structure of Unjust Enrichment
35
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
36
Ernest J Weinrib
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.
The Normative Structure of Unjust Enrichment
37
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).
38
Ernest J Weinrib
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).
The Normative Structure of Unjust Enrichment
39
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).
40
Ernest J Weinrib
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
The Normative Structure of Unjust Enrichment
41
‘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.
42
Ernest J Weinrib
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
The Normative Structure of Unjust Enrichment
43
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).
44
Ernest J Weinrib
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’.
The Normative Structure of Unjust Enrichment
45
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.
48
Kit Barker
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.
Responsibility for Gain
49
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.’
50
Kit Barker
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.
Responsibility for Gain
51
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
52
Kit Barker
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
Responsibility for Gain
53
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.
54
Kit Barker
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
Responsibility for Gain
55
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.
56
Kit Barker
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.
Responsibility for Gain III
57
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
58
Kit Barker
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’.
Responsibility for Gain
59
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
60
Kit Barker
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
Responsibility for Gain
61
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).
62
Kit Barker
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.
Responsibility for Gain
63
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.
64
Kit Barker
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
Responsibility for Gain
65
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
66
Kit Barker
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.
Responsibility for Gain
67
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
68
Kit Barker
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
Responsibility for Gain
69
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.
70
Kit Barker
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.
Responsibility for Gain
71
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].
72
Kit Barker
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
Responsibility for Gain
73
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.
74
Kit Barker
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.
78
Mitchell McInnes
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
Taxonomic Lessons for the Supreme Court of Canada
79
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).
80
Mitchell McInnes
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
Taxonomic Lessons for the Supreme Court of Canada
81
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).
82
Mitchell McInnes that a single response may be classified differently, depending upon the nature of the inquiry. 4.1 While legal responses typically take the form of remedies (a word that deeply troubled Birks16), they may also take the form of legal relationships. Accordingly, the law may respond to the causative event of bilateral consent by creating contractual rights and obligations between the parties. If one of those rights is breached, that new event may in turn trigger a variety of responses. 4.2 From a slightly different perspective, the same facts can be analysed in terms of ordering of rights. The event of bilateral consent results in the creation of primary rights (for example, reciprocal rights to pay money and transfer title to a car). A breach of one of those primary rights in turn results in the creation of secondary rights (for example, a right to receive damages). 4.3 Secondary rights typically take the form of ‘damages’ (using that term broadly to refer to a response by which a court orders the defendant to pay money to the claimant). Damages may be further classified according to their purpose: reparation of a loss (compensation), reversal of a transfer between the parties (restitution), divestment of a gain (disgorgement), symbolic vindication of a right (nominal), or punishment and deterrence (punitive). 4.4 Classification often addresses the issue of exigibility. Some rights are personal (in personam) insofar as they are enforceable against only one person. In Birks’s vivid image,17 a chain connects two parties. The positive end, held in hand, consists of a right. The negative end, strung around the other’s neck, consists of a duty or obligation. Other rights are real or proprietary (in rem). Although one side of the equation again takes the form of rights, the other end is mediated through the thing (or res). The rights therefore are enforceable against the thing, regardless of who holds it. Such rights may be further divided according to the nature of the claimant’s property rights (for example, ownership as in a trust, or security as in a lien).
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
Taxonomic Lessons for the Supreme Court of Canada
Fig 1
A
83
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
84
Mitchell McInnes
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.
Taxonomic Lessons for the Supreme Court of Canada (i)
85
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).
86
Mitchell McInnes
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).
Taxonomic Lessons for the Supreme Court of Canada
87
(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).
88
Mitchell McInnes
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.
Taxonomic Lessons for the Supreme Court of Canada (iv)
89
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).
90
Mitchell McInnes
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).
Taxonomic Lessons for the Supreme Court of Canada
91
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
92
Mitchell McInnes
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.
Taxonomic Lessons for the Supreme Court of Canada
93
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).
94
Mitchell McInnes
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.
Taxonomic Lessons for the Supreme Court of Canada
95
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
96
Mitchell McInnes
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.
Taxonomic Lessons for the Supreme Court of Canada
97
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,
98
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.
Taxonomic Lessons for the Supreme Court of Canada
99
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).
100
Mitchell McInnes
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
Taxonomic Lessons for the Supreme Court of Canada
101
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.
104
Emily Sherwin
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
Legal Positivism and the Taxonomy of Private Law
105
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.
106
Emily Sherwin
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).
Legal Positivism and the Taxonomy of Private Law
107
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.
108
Emily Sherwin
(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.
Legal Positivism and the Taxonomy of Private Law
109
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.’
110
Emily Sherwin
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’).
Legal Positivism and the Taxonomy of Private Law
111
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.
112
Emily Sherwin
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?
Legal Positivism and the Taxonomy of Private Law
113
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.
114
Emily Sherwin
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
Legal Positivism and the Taxonomy of Private Law
115
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.
116
Emily Sherwin
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).
Legal Positivism and the Taxonomy of Private Law
117
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.
118
Emily Sherwin
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
Legal Positivism and the Taxonomy of Private Law
119
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.’
120
Emily Sherwin
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’).
Legal Positivism and the Taxonomy of Private Law
121
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.
122
Emily Sherwin
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.
Legal Positivism and the Taxonomy of Private Law
123
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
124
Emily Sherwin
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
Legal Positivism and the Taxonomy of Private Law
125
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).
126
Emily Sherwin
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’).
128
Richard Sutton
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.
Restitution and the Discourse of System
129
“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.
130
Richard Sutton
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.
Restitution and the Discourse of System
131
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.
132
Richard Sutton
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
Restitution and the Discourse of System
133
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
134
Richard Sutton
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.
Restitution and the Discourse of System III
135
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
136
Richard Sutton
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
Restitution and the Discourse of System
137
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.
138
Richard Sutton
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).
Restitution and the Discourse of System
139
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
140
Richard Sutton
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.
Restitution and the Discourse of System
141
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.
142
Richard Sutton
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.
Restitution and the Discourse of System
143
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.
Restitution and the Discourse of System
145
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
T
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.
148
Hanoch Dagan
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
Legal Realism and the Taxonomy of Private Law
149
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. *
*
*
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.
150
Hanoch Dagan
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.
Legal Realism and the Taxonomy of Private Law
151
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. *
*
*
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.
152
Hanoch Dagan
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 *
*
*
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.
Legal Realism and the Taxonomy of Private Law
153
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.
154
Hanoch Dagan III
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
Legal Realism and the Taxonomy of Private Law
155
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.
156
Hanoch Dagan
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 *
*
*
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.
Legal Realism and the Taxonomy of Private Law
157
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
158
Hanoch Dagan
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.
Legal Realism and the Taxonomy of Private Law
159
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.
160
Hanoch Dagan
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.
Legal Realism and the Taxonomy of Private Law
161
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
162
Hanoch Dagan
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).
Legal Realism and the Taxonomy of Private Law
163
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.
164
Hanoch Dagan
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.
Legal Realism and the Taxonomy of Private Law
165
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.
166
Hanoch Dagan
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.
168
Stephen Waddams
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
Contract and Unjust Enrichment
169
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
170
Stephen Waddams
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.
Contract and Unjust Enrichment
171
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.
172
Stephen Waddams
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
Contract and Unjust Enrichment
173
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.
174
Stephen Waddams
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).
Contract and Unjust Enrichment
175
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.
176
Stephen Waddams
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
Contract and Unjust Enrichment
177
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.
178
Stephen Waddams
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
Contract and Unjust Enrichment
179
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.
180
Stephen Waddams
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.
Contract and Unjust Enrichment
181
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
182
Stephen Waddams
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
Contract and Unjust Enrichment
183
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.
186
Daniel Friedmann II
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
Entitlements in Restitution III
187
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).
188
Daniel Friedmann
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
Entitlements in Restitution
189
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
190
Daniel Friedmann
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
Entitlements in Restitution
191
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.
192
Daniel Friedmann
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).
Entitlements in Restitution
193
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.
194
Daniel Friedmann
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
Entitlements in Restitution
195
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.
196
Daniel Friedmann
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
Entitlements in Restitution
197
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
198
Daniel Friedmann
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.
Entitlements in Restitution
199
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.
200
Daniel Friedmann
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
Entitlements in Restitution
201
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).
202
Daniel Friedmann
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
Entitlements in Restitution
203
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
204
Daniel Friedmann
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
206
Steve Hedley
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.
The Shock of the Old
207
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.
208
Steve Hedley
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.
The Shock of the Old
209
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 me
