Restitutionary claims are pertinent to our daily interactions and commercial dealings. These claims arise in many scenarios including: improperly collected taxes, mistaken payments, disputes between cohabitants, payments on another person’s debt, mistaken improvements on another person’s property, and provision of unrequested services.
Originally coined by one of the leading private law scholars of the 20th century, Oxford Law Professor Peter Birks (1940-2002), the law of unjust enrichment provides a unifying framework for understanding the nature of all restitutionary claims, revealing a single ‘skeleton’ beneath. Stated in these terms, the law of unjust enrichment is a distinct ground of liability, alongside such classical private law categories as property, contract, torts, and equity. By situating previously disorganised restitutionary claims within one normative thread, unjust enrichment makes an argument about the past, present, and future of private law.
Professor Peter Birks stated that the following four elements constitute unjust enrichment’s liability formula:
- A defendant’s enrichment—the claimant should demonstrate that the defendant received some ‘benefit’ or ‘value’;
- at the plaintiff’s expense—the claimant should demonstrate that the enrichment occurred at their expense, establishing a causal link between the parties;
- the enrichment is unjust—the claimant should demonstrate that the enrichment falls into one of the categories previously recognised by the courts, such as mistake, duress, undue influence, or frustrated contract;
- defences—if the claimant proves the first three elements of the formula, then the defendant is able to claim the existence of one (or more) of the defences previously recognised by the courts, which could deny restitution.
Consider, for example, the case of mistaken payments where a claimant mistakenly transfers money to a defendant. The defendant receives money, meaning they are ‘enriched’ at the claimant’s expense. The case falls within one of the previously established categories—mistakes. It is open to the defendant to claim one of the defences. For example, the defendant can demonstrate that they spent the money in good faith on purchasing certain goods; something they would not have done without the mistaken transfer.
The four steps formula has been adopted in the House of Lords in Lipkin Gorman (1992) and then followed to varying degrees in other common law jurisdictions, such as Singapore, Hong Kong, and New Zealand. The four-stage formula has also heavily informed Canadian jurisprudence. Unjust enrichment has a different history in Australia where it has fallen in and out of favour. Yet, the future of unjust enrichment could not be brighter, not just in the UK, but across a wide range of the Commonwealth jurisdictions.
However, despite the continued support for unjust enrichment, there have always been academic critics of the idea. This now includes those who once supported the idea. The recent monograph by Oxford Law Professor Robert Stevens has challenged each one of the constitutive elements of the formula. Stevens demonstrates the significant difficulty that the UK courts have faced since Lipkin Gorman. Some elements and concepts of the formula (such as the concept of ‘value’ and the ‘at the plaintiff’s expense’ element) are intolerably vague and flexible, leading to unjustifiable results and implausible unpredictability.
Most troublingly, Stevens shows that a careful review of many restitutionary claims reveals them to be at odds with the most important element of Birks’ formula—the defendant’s enrichment. An examination of the courts’ reasoning over the centuries suggests that the courts have traditionally focused on the nature of a particular transaction between parties, rather than on the consequences of it. The question of whether given plaintiff was enriched, suffered a loss, or remained the same as a result of a transaction has been irrelevant to the question of finding a defendant liable in restitution. In other words, restitutionary claims appear to epitomise a law of defective transactions, rather than a law of a defendant’s enrichment. Stevens’ point is brutally simple: unjust enrichment doctrinally collapses.
Furthermore, contemporary scholars across the world have united in their opposition to unjust enrichment; the sceptics coming from such jurisdictions as Australia, New Zealand, Hong Kong, Canada, USA, Ireland, and India have expressed their concerns. The united manifesto says that a deep understanding of unjust enrichment requires an examination of its core claims from different angles. This understanding is critical for the future development of private law and private law categories, and the consideration of how these can serve the needs of society in the most just, fair, and predictable way.
Accordingly, our work Rethinking Unjust Enrichment has provided a comprehensive outlook of unjust enrichment from the following multi-layered, interdisciplinary perspectives: doctrine, history, theory, and sociology. For instance, it has been argued that the doctrinal fallacies of unjust enrichment are not limited to the UK, but pertinent to other jurisdictions as well. Historically, it has been doubted whether unjust enrichment was present in the reasoning of common law judges. The very idea that a defendant should be found liable due to their enrichment appears to be problematic through the conceptual lens of justice and fairness in private law. Finally, sociologically, it has been suggested that the remarkable success of unjust enrichment should be attributed more to the identity of the reformers rather than to the doctrinal attractiveness of the four-stage formula.
Unjust enrichment stands at a crossroad. The lessons of the recent years perhaps demonstrate two things: (1) the centrality of restitutionary claims and (2) the heated debate between supporters and opponents of the idea of unjust enrichment as a unifying basis of those claims. A productive dialogue between the two rival camps should be encouraged to contemplate together how we should understand the past, present, and future of private law.
Featured image by Ash Edmonds via Unsplash.
Fairness or certainty? Pick one.
In this, as in many other areas of private law, the twin goals of predictability of operation of the rules and fairness in individual cases are at odds with each other.
The doctrine of unjust enrichment has a chequered history. As the circumstances change across a wide range of the Commonwealth jurisdictions, it needs to be revisited from time to time. Change is the law of nature. Professor Stevens rightly notes that some of its ingredients such as the concept of ‘value’ and the ‘at the plaintiff’s expense’ element’ are quite vague yielding unjustifiable results and creating an atmosphere of unpredictability.
It is noteworthy that judicial reasoning for centuries suggests that the courts have often focused on the nature of a specific transaction between parties, not on its consequences. The critical question of whether the plaintiff was enriched, suffered a loss, or remained the same as a result of such a transaction has been immaterial to the question of finding a defendant liable in restitution. In other words, restitutionary claims invariably allude to a law of defective transactions. They have little to do with the law of a defendant’s enrichment. The critics and sceptics rightly argue that a proper appreciation of unjust enrichment calls for a microscopic scrutiny of its core claims from various perspectives. Such an understanding is vital for progressive development of private law and promoting justice. The thought-provoking book co-authored by Professors Sagi Peari and Warren Swain has made a significant and just contribution to the debate on unjust enrichment.