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Restitution and unjust enrichment is the field of law relating to gains-based recovery. In contrast withdamages (the law of compensation), restitution is a claim or remedy requiring a defendant to give up benefits wrongfully obtained. Liability for restitution is primarily governed by the "principle of unjust enrichment": A person who has been unjustly enriched at the expense of another is required to make restitution.[1]
This principle derives from late Roman law, as stated in the Latin maxim attributed toSextus Pomponius,Jure naturae aequum est neminem cum alterius detrimentum et injuria fieri locupletiorem[2] ("By natural law it is just that no one should be enriched by another's loss or injury"). Incivil law systems, it is also referred to asenrichment without cause orunjustified enrichment.
In pre-modern English common law, restitutionary claims were often brought in an action forassumpsit and later in a claim formoney had and received. The seminal case giving a general theory for when restitution would be available isLord Mansfield's decision inMoses v Macferlan (1760), which imported into the common law notions of conscience from Englishchancery.[a] Blackstone's Commentaries also endorsed this approach, citingMoses.[3]
Where an individual is unjustly enriched, modern common law imposes an obligation upon the recipient to make restitution, subject to defences such aschange of position and the protection ofbona fide purchasers from contrary equitable title. Liability for an unjust enrichment arises irrespective of wrongdoing on the part of the recipient, though it may affect available remedies. And restitution can also be orderedfor wrongs (also called "waiver of tort" becauseelection of remedies historically occurred when first filing a suit). This may be treated as a distinct basis for restitution, or it may be treated as a subset of unjust enrichment.
Unjust enrichment is not to be confused withillicit enrichment, which is a legal concept referring to the enjoyment of an amount of wealth by a person that is not justified by reference to their lawful income.
Incivil law systems, unjust enrichment is often referred to asunjustified enrichment. Its historical foundation of enrichment without cause can be traced back to the Corpus Iuris Civilis.[4] While the concept of enrichment without cause was unknown in classical Roman law,[5] Roman legal compilers eventually enunciated the principle of unjustified enrichment based on two actions of the classical Roman period—thecondictio and theactio de in rem verso.[4]
Thecondictio authorized recovery by the plaintiff of a certain object or money in the hands of the defendant. The defendant was considered a borrower who was charged with returning the object or money.[6] For theactio de in rem verso, the plaintiff bore the burden of specifying the cause for his demand, namely, demanding the restitution of assets that had exited the plaintiff's patrimony and entered the defendant’s patrimony through the acts of the defendant’s servants.[7]
The coherent concept of unjustified enrichment then appeared in the Justinian Code, based on Roman pragmatism with equitable considerations and moral principles of Greek philosophy.[4] In the Justinian Code,condictiones were grouped into categories, such as when the plaintiff had given a thing or money:[4]
Further, theactio de in rem verso gradually expanded to cover instances in which third parties were enriched at the expense of the impoverished obligee, andunjustified enrichment was recognized as a source of obligations under the heading of "quasi-contract".[4]
For theSchool of Salamanca members, likeTomás de Mercado, the prohibition of unjustified enrichment finds directly its source innatural law,[8] which doesn't allow a privileged party, and in the principle of commutative justice.[9] Thus it manages apply to the entire law on propriety and contract. It had, for example, a strong influence on the reflexions regarding contracts of prostitution.[10]
The interpretations of Roman law principles on unjustified enrichment, by the French juristJean Domat and the German juristFriedrich Carl von Savigny, formed the respective origins of the modern French and German law on unjustified enrichment.[11] Domat developed the French unjustified enrichment principles based on theactio de in rem verso, as well as a modified version of the Roman concept ofcausa (cause), which renders contracts actionable even when they are not normally recognized under Roman law.[4] In contrast, the concept of unjustified enrichment is considerably broader and more frequently invoked in Germany and Greece to address issues of restitution as well as restoration for failed juridical acts.[12]Equitable tracing is a particularly well suited remedial tool.
See also:English unjust enrichment law
In systems of law derived from the Englishcommon law, the historical core of the law of unjust enrichment lies inquasi-contract. These were common law (as distinct fromequitable) claims giving rise to a personal liability to pay the money value of a benefit received from another. Legal scholars fromOxford,Cambridge andHarvard at the turn of the 20th century began to rationalise these disparate actions into a coherent body of law.[13] The principle said to underlie these actions was eventually recognized as unjust enrichment.[14] Subsequent scholarship has sought to expand the explanatory power of the principle of unjust enrichment and it is now often said (albeit not without controversy)[15] to encompass both common law andequitable claims.[16]
Cases of unjust (or unjustified) enrichment can be examined in the following way:
These questions are a familiar part of the modernEnglish law of unjust enrichment, having been popularised by the writing ofProfessor Peter Birks and expressly endorsed by English courts.[17][18] The framework provides a useful taxonomical function in Australian law,[19] although the concept of unjust enrichment has been subject to inconsistent treatment by Australian courts, as discussed below. Stated at this level of abstraction, the framework is a useful grounding for comparative study between common law and civil law jurisdictions.
Generally speaking, the mere receipt of a benefit from another is unobjectionable and does not attract legal consequences. The exception is where such receipt is "unjust" or "unjustified". Bothcivil andcommon law legal systems have bodies of law providing remedies to reverse such enrichment.
A conceptual split, albeit one not necessarily coextensive with the common law - civil distinction, is between systems based on an "unjust factor" approach and systems based on an "absence of basis" approach.
In most cases, the conceptual approach does not affect the outcome of a case. For example, suppose that A makes an oral contract with B under which A will pay $100 for certain services to be provided by B. Further suppose that A pays the money but B discovers that, pursuant to legislation, contracts for such services are void unless in writing. B refuses to perform. Can A recover his payment? On both approaches, B is unjustly enriched at A's expense. On the "absence of basis" approach, B's enrichment has no legitimate explanatory basis because the contract was void. On the "unjust factor" approach, there has been a total failure of consideration – that is, A has received no part of the bargained-for counter-performance; restitution follows automatically from the fact of invalidity.
The remedy for unjust enrichment isrestitution: the restoration of what was conferred to the claimant. In short, the correcting of the injustice that occurred when the claimant suffered a subtraction of wealth and the defendant received a corresponding benefit.[21] Restitution can take the form of a personal or a proprietary remedy.
Where apersonal remedy is awarded, the defendant is ordered to pay the money value of the benefit received. This personal money award is the typical form of restitution ordered.
Where aproprietary remedy is awarded, the court recognises (or declares) that the defendant has a beneficial or security interest in specific property of the defendant. Whether proprietary remedies can be awarded depends on the jurisdiction in question.
Imagine that A commits a wrong against B and B sues in respect of that wrong. A will certainly be liable to pay compensation to B. If B seeks compensation then the court award will be measured by reference to the loss that B has suffered as a result of A's wrongful act. However, in certain circumstances it will be open to B to seek restitution rather than compensation. It will be in B's interest to do so if the profit that A made by his wrongful act is greater than the loss suffered by B. Or in some circumstances, the lost good "G" carries more value to B than the actual cost of "G". For example, suppose B possesses a rare book from the 14th century (G), which cost only Rs 10 in that period. A has illegally stolen G (from B) and has destroyed it. Currently very few samples of G exist in the world, yet since its demand is not much, G still costs Rs 10. Since very few samples exist in the world, it is near impossible to find a person from whom G could be bought. In such a circumstance, B is entitled to get Rs 10 from A under the law of torts. However, B might prefer to apply law of restitution instead (waiver of torts), and claim that he needs a copy of G rather than Rs 10.
Whether or not a claimant can seek restitution for a wrong depends to a large extent on the particular wrong in question. For example, in English law, restitution for breach offiduciary duty is widely available but restitution for breach ofcontract is fairly exceptional. The wrong could be of any one of the following types:
Note that 1–5 are allcausative events (see above). The law responds to each of them by imposing an obligation to pay compensatory damages. Restitution for wrongs is the subject which deals with the issue of when exactly the law also responds by imposing an obligation to make restitution.
InAttorney General v Blake,[25] an English court found itself faced with the following claim. The defendant had made a profit somewhere in the region of £60,000 as a direct result of breaching his contract with the claimant. The claimant was undoubtedly entitled to claim compensatory damages but had suffered little or no identifiable loss. It therefore decided to seek restitution for the wrong of breach of contract. The claimant won the case and the defendant was ordered to pay over his profits to the claimant. However, the court was careful to point out that the normal legal response to a breach of contract is to award compensation. An order to make restitution was said to be available only in exceptional circumstances.
Whether there is a distinct body of law in Australia known as the law of unjust enrichment is a highly controversial question. InPavey & Mathews v Paul(1987) 162 CLR 221 the concept of unjust enrichment was expressly endorsed by the High Court of Australia. This was subsequently followed in numerous first instance and appellate decisions, as well as by the High Court itself.
Considerable skepticism about the utility of the concept of unjust enrichment has been expressed in recent years. Theequitable basis for the action for money had and received has instead been emphasised and inAustralian Financial v Hills [2014] HCA 14 the plurality held that the concept of unjust enrichment was effectively 'inconsistent' with the law of restitution as it had developed in Australia. It is worth noting that the analytic framework had been expressly endorsed by the High Court just two years before inEquuscorp v Haxton [2012] HCA 7. For the moment, the concept of unjust enrichment appears to serve only a taxonomical function.[26]
The reception of unjust enrichment into Belgian law has been upheld multiple times by theCourt of Cassation, which has ruled that unjust enrichment is a general principle of law.[27][28][29] The Court has stated that the legal basis for unjust enrichment isequity (ius aequum).
According to the Court, five elements constitute unjust enrichment:
The doctrine of unjust enrichment was definitively established as a fully fledged course of action in Canada inPettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 SCR 834[30]
To establish unjust enrichment, the Plaintiff needs to show: (i) enrichment; (ii) deprivation; (iii) causal connection between enrichment and deprivation; and (iv) absence of juristic justification for the enrichment.[30]
The concept of deprivation and enrichment are extremely broad. Deprivation refers to any loss of money or money's worth in the form of contribution while A is enriched if B contributes to the acquisition of assets in A's name.[30] The causal connection between enrichment and deprivation must be "substantial and direct".[30] The absence of juristic reason is satisfied if a Plaintiff establishes a reason why the benefit ought not be retained, or if the Defendant demonstrates a convincing argument in favour of retention of the property.[30] Remedy for unjust enrichment is frequently an imposition of constructive trust over the property unjustly retained.[30]
Thelaw of unjust enrichment in England rapidly developed during the second half of the 20th century. It has been heavily influenced by the writings of jurists fromOxford andCambridge.[31] England adopts the "unjust factor" approach.
In Scotland, the law developed in a piecemeal fashion through the twentieth century, culminating in three pivotal cases in the late 1990s. The most crucial of these wasShilliday v Smith, in which Lord Roger essentially laid the bedrock for what is now considered modern Scots unjustified enrichment law, bringing together the fragmented law into one framework, drawing from the principles of Roman Law upon which Scots Law as a whole is based (note the term "unjustified" is preferred to "unjust" in Scotland). Unjustified enrichment is more established as a fundamental part of the Scots law of obligations than unjust enrichment is in English law.[32]
TheRestatement (Third) of Restitution and Unjust Enrichment (2011) (“R3RUE”) states that unjust enrichment is a body of legal obligations under thecommon law andequity – but separate fromtort andcontract law – that is available to take away an enrichment that lacks an adequate legal basis. A claim of restitution for unjust enrichment “results from a transaction that the law treats as ineffective to work a conclusive alteration in ownership rights.”[33][34]
The Third Restatement and its predecessor, theRestatement on Restitution (1937),[b] advocate for treating restitution as a unified and cohesive body of law, rather than a muddled variety of miscellaneous legal and equitable claims, remedies, and doctrines such asquantum meruit,quantum valebant,account of profits,quasi-contract,constructive trust,money had and received, and so forth.
Because the common law is mostly governed by state law, especially afterErie Railroad Co. v. Tompkins (1938), restitution is mostly determined by the law of each state and territory. However, it can also be a remedy under federal law. Also in 1938, the enactment of theFederal Rules of Civil Procedure merged procedures for law and equity and replaced the common-lawforms of action with a single civil action. This has, to some extent, blurred differences between legal and equitable restitution, and obscured awareness of legal restitution's origin in the action ofassumpsit.[35]
One early case in the Supreme Court,Bingham v. Cabot (1795), was a suit at law formoney had and received,quantum meruit, andquantum valebant (three "common counts" for legal restitution). (The decision focused on other questions, including whether the case should have been brought inadmiralty and whether in deciding awrit of error the court could take notice of certain facts.)
InBright v. Boyd, 4 F. Cas. 127,132-34 (C.C.D. Maine 1841), JusticeJoseph Story, a prominent early American jurist (and author of influential treatises on equity), held that recovery was available inequity for mistaken improvements to land (i.e., when the person improving the land later learns that he did not own the land), citing the Latin maxim against enrichment at another's detriment.
Federal patent and copyright law has long allowed recovery for either damages or profits. InLivingston v. Woodworth, 56 U.S. 546 (1854), the Supreme Court held that a patent-owner could sue in equity for an infringer’s profits, saying that the ill-gotten profits belonged “ex aequo et bono” to the owner of the patent. Later, recovery for either damages or profits was codified in statute. The Supreme Court identified recovery of profits under the Copyright Act as a form of equitable relief for “unjust enrichment” inSheldon v. Metro-Goldwyn Pictures Corp. (1940).
InTrustees v. Greenough 105 U.S. 527 (1881), the Supreme Court held that, in a representative suit in equity (later known as aclass action), a representative plaintiff who recovers a "common fund" for the benefit of all represented plaintiffs (absent class members) may recover attorney fees from the fund, preventing enrichment of the absent plaintiffs at the expense of the representative plaintiff. This is an exception to the "American rule" that litigants must pay their own attorney fees (absent statutory exceptions). InCentral Railroad & Banking Co. of Georgia v. Pettus (1885), the court held that the representative plaintiff could not, however, recover a salary for the time spent litigating.
Restitution is available in equity to recover money previously paid to satisfy a court judgment that is later reversed, as the Supreme Court held inAtlantic Coast Line R. Co. v. Florida, 295 U.S. 301 (1935). However, the Court therefore noted that equitable defenses are available where it would not be fair to require the money to be returned.
InMobil Oil Exploration & Producing Southeast, Inc. v. United States, 530 US 604 (2000), the Supreme Court ruled that, in a contract with the United States (one of few areas where federal contract law applies), repudiation is grounds for restitution, even if the contract was repudiated by a statute. (Congress had blocked Mobil's offshore oil lease, so the United States had to return the money paid for the lease.)
InGreat-West Life and Annuity Insurance Company v. Knudson, 534 U.S. 204 (2002), the Supreme Court noted that legal restitution and equitable restitution are not historically identical, and so it held that legal restitution is not covered by a provision ofERISA authorizing only equitable relief.
InKansas v. Nebraska, 574 U.S. 445 (2015), the Supreme Court ordered restitution by Nebraska as anequitable remedy for breach of an interstate water-sharing agreement with Kansas. The majority cited the Third Restatement to support the availability of restitution for “opportunistic breach” of contract.
InLiu v. Securities and Exchange Commission (2020), the Supreme Court held that restitution (usually called “disgorgement” in U.S. securities law) is available for violations of federal securities law because the SEC is authorized to seek “equitable relief” under 15 U.S.C. § 78u(d)(5).
InAMG Capital Management, LLC v. FTC (2021), the Supreme Court held that statutory authority for the Federal Trade Commission to sue for an “injunction” does not authorize suit for restitution. The court unanimously held that the statutory language refers to prospective equitable relief, and does not include retrospective monetary relief.
InPearson v. Target Corp., 968 F.3d 827 (7th Cir. 2020), theSeventh Circuit held that equitable restitution is available for a practice known as "objector blackmail," where objectors to aclass action settlement drop their objections on behalf of the class in return for aprivate payment in excess of the rest of the class.
InWilliams Electronics Games, Inc. v. Garrity, 366 F.3d 569 (7th Cir. 2004), JudgeRichard Posner held that restitution for wrongs is generally "available in anyintentional-tort case in which the tortfeasor has made a profit that exceeds the victim's damages." (The Third Restatement puts further qualifications, including that restitution for wrongs is not available where aninjunction to prevent the tort would have been inequitable.[36])
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