Source: https://ouclf.law.ox.ac.uk/property-subsidiarity-and-unjust-enrichment/
Timestamp: 2020-07-13 08:02:56
Document Index: 139579130

Matched Legal Cases: ['§ 812', '§ 987', '§ 987', '§ 812', 'art. 1699', 'art. 1704', 'art. 1494', '§ 812', 'art. 1493', 'art. 1494', 'art. 1494', 'art. 1494', 'art. 1494', 'art. 1373', 'art. 1495', 'art. 1702', 'art. 910', '§ 993', 'art. 1494', 'Art. 1493', 'art. 1494', 'art. 1494', 'Art. 1494', 'art. 1494', 'art. 1493', 'art. 1493']

Property, Subsidiarity, and Unjust Enrichment. | Oxford University Comparative Law Forum
Property, Subsidiarity, and Unjust Enrichment.
by Lionel Smith1
(2000) Oxford U Comparative L Forum 6 at ouclf.law.ox.ac.uk | How to cite this article
If someone were asked, as I was, to write a paper dealing with “proprietary issues” in the law of unjust enrichment, he or she would most naturally think of proprietary consequences: that is, the extent to which unjust enrichments can be reversed by proprietary as opposed to obligationary responses. This of course would be an interesting study, although it might lack a certain promise as a comparative work, due to the well-known refusal of civilian systems to have any truck with such odd and uncontrollable devices as the constructive trust.2 Instead I have chosen to consider the interaction between the law of property and the law of unjustified enrichment from the other end: that is, the extent to which the existence of a proprietary claim affects the availability of a claim in unjustified enrichment. Or at least, I chose so to begin; for the study grew, as such things will, and in the end it has become a wider look at how and why the availability of unjustified enrichment is conditioned by the existence of other kinds of claims. The focus is on the common law, German law and the law of Quebec.
It can be described, then, as a comparative study of devices for controlling the scope of liability in unjust enrichment; but it must be emphasized that it is a study of only some such devices. The grounds on which claims can be made, the meaning of enrichment, the available defences: all of these could be described as devices for controlling the scope of liability, and so a comprehensive study of such devices would amount to a book on the subject. This attempt is obviously more limited in its amibitions, but it bears remembering that a restrictive approach taken by a system in one context can be offset by a more liberal approach in another.
The threshold question is whether a plaintiff is allowed to make a claim in unjustified enrichment in respect of the transfer of some asset, in the case where the plaintiff remains the owner of the asset in question. A simple case will illustrate the point: if a thief steals my horse, can I sue the thief in unjustified enrichment?3
The position in the common law is not definitively settled. One reason may be that the question seems to have little practical implication. The common law protects property in movables through the law of wrongs, and in particular through the tort of conversion which is a tort of strict liability. It is also a tort which does not admit of the defence of change of position. The tort claim being wider than the unjustified enrichment claim, there is no incentive to bring the latter. Even a defendant who came into possession of my horse in good faith is liable in conversion. There may, however, be some relevance where the plaintiff’s proprietary right is an Equitable rather than a legal one.4 The reason is that claims for interference with a plaintiff’s Equitable proprietary rights are not strict but fault-based.5 If the plaintiff were allowed to deploy an unjustified enrichment claim instead, the scope of liability might be wider.6 It is also true that such things as limitation periods and the outcome of choice of law rules might differ depending upon what type of claim the plaintiff is able to deploy.7
It has been suggested that in such a case, there is no room for an unjustified enrichment claim. One argument is that the defendant is not enriched in the requisite sense if the plaintiff retains his proprietary rights in the transferred asset.8 Under this view, the non-availability of a claim in unjustified enrichment arises as a matter of logical necessity. The argument is that the elements of unjustified enrichment are simply not satisfied.
In order to evaluate this argument, a word must first be said about the measure of recovery. Assume that the thief stole my horse one year before the time of trial. If my claim were calculated so as to represent the recovery of the value of one year’s use of the horse, it would be hard to deny it. That value has clearly been transferred from me to the defendant; and presumably, such a claim would leave untouched my ownership of the horse. The more difficult question is whether I can have an enrichment claim measured by the value of my ownership. Here the objection makes sense, and indeed has a certain logical attraction: if my ownership has not been transferred, how can I say that the defendant was enriched by the value of my ownership? On the other hand, the objection ignores the common law’s tendency to multiply remedies, preventing excess recovery by requiring the plaintiff to elect between them.9 For example, if I were to sue the horse thief in conversion, the normal measure of damages would reflect the full ownership of the horse, even though I remained the owner. Upon recovery of the full judgment, the ownership would be transferred by operation of law to the defendant.10 There is no reason that this system, which was necessitated by the lack of any ability to revendicate a movable thing, could not operate in unjustified enrichment claims. That is, the enrichment claim could also be measured by the value of full ownership of the horse, and upon payment of the judgment, title would pass. So, it is strongly arguable that the enrichment claim is available at common law. We now turn to other systems.
Roman law provided for the reversal of unjustified enrichment through a set of actions called condictions. These were personal claims for the transfer of a specific thing, or of a fixed amount of money or some other fungible asset. The form of words used in these claims asked for relief should it appear to the judge that the defendant “ought to give” to the plaintiff that which was the object of the claim. In this context, at least in classical Roman law if not earlier, these words were understood to imply that the object of the claim belonged to the defendant. So on the face of it, no condiction could logically be used in the case of the stolen horse with which we are concerned.
But the position was not governed entirely by logic. One of the condictions was the condictio ex causa furtiva, and Gaius observed that it could be used against a defendant guilty of furtum even though he did not become owner of the stolen thing:
This distinction between real and personal actions means that we definitely cannot seek something of our own from another by a pleading: ‘if it appears that he has a duty to give’. For what we own cannot be given to us, because ‘give’ is to be understood as meaning giving so that it may become ours. What is already ours cannot be made more so. No doubt it was from hatred of thieves, to multiply their liabilities, that the law came to allow against them not only the claims for twofold or fourfold penal damages [actio furti] but also the pleading: ‘if it appears that they have a duty to give’, even though the real action [rei vindicatio], by which we claim what is ours, is also competent against them.11
Clearly Gaius viewed the claim as anomalous. The reason he gives, the hatred of thieves, is not the only one which has been suggested.12 If we take it as correct, it means that hatred of thieves leads to the allowance of an anomalous claim in order to make it easier for the plaintiff to recover, or to recover more. If, regarding the recovery of what was stolen or its value,13 the plaintiff were confined to his rei vindicatio, then he would need to prove that the defendant still had the stolen thing. He would also need to prove his “quiritary ownership” of the thing. Moreover, the value would be assessed at the time of the commencement of proceedings, whereas under the condictio ex causa furtiva, it was taken to be the highest value since the commission of the theft.14 Finally, the condiction could be brought against an heir of the thief, unlike a delictual action.15 It may be noted that the condiction, measured by the value of ownership of the thing, was alternative and not cumulative to the rei vindicatio; similarly to the common law position, the enrichment claim effectively transferred a kind of title to the defendant.16
But if allowing this claim was anomalous, it must be that the “normal” position was that no condiction was available where the plaintiff remained the owner; only the rei vindicatio could be brought. Although the concept of furtum was much wider than our modern idea of theft,17 nonetheless it was possible for the defendant to acquire the plaintiff’s horse in circumstances which did not amount to furtum; he might find it, or purchase it in good faith. In such a case, it seems, the Roman law position was that there was no enrichment remedy, but only the rei vindicatio.18 If we ask why this was, we might be tempted to say that the concepts used by the Roman lawyers were not sufficiently fine-grained to distinguish enrichment by use from enrichment by a transfer of ownership. In general terms, such an idea would clearly be incorrect. The possibility of theft of possession was recognized; if an owner pledged a thing with a creditor and then took it away without the latter’s consent, this was furtum.19 Moreover, there are cases in which it seems the condictio ex causa furtiva was available to a plaintiff who was a non-owner in possession, and whose possession was taken by the defendant.20 So at least against a thief, a transfer of possession could support a condiction, whether or not the plaintiff was the owner. And it has been argued that even in the absence of furtum, a plaintiff who was and remained the owner could use a condiction against a good faith finder of property.21
This brings us back to the anomaly of furtum. The discussion in Gaius suggests that it was anomalous in the sense that the claim was allowed even though the facts did not really fit the words of the formula, the defendant not being the owner. If it was possible for the owner to use a condiction even in the absence of furtum, then it was not so anomalous. But it may be that the anomaly lay in the measure of recovery. Clearly, the condictio ex causa furtiva allowed recovery measured by the full value of ownership, and was a non-cumulative alternative to the rei vindicatio. It is less clear what might be the measure of recovery in the case of a condiction brought by an owner in the absence of furtum, but one possibility would be that recovery would be measured only by the value the defendant had derived by use. This would leave the plaintiff’s ownership, and his rei vindicatio, intact.
3. German Law
Most of the condictions of Roman law were codified in the BGB, but that code also added a general enrichment action.22 The doctrine which has grown up around this part of the BGB is complicated indeed.23 But the law governing the point with which we are concerned seems fairly clear. Where the plaintiff remains owner of a thing which is in the possession of the defendant, the defendant not having a right to retain possession, the provisions on unjustified enrichment in §§ 812-822 do not govern. Rather, the situation is governed by an “owner-possessor relationship” (Eigentümer-Besitzer-Verhältnis) and certain provisions of the book on property govern (§§ 987 ff). These provide for the restitution to the owner of any benefits derived from the thing by the possessor, including fruits but also use value. They also provide for the recovery from the owner of any necessary expenditures. The extent of recovery turns in large part on whether the possessor was in good faith.24
Generally, then, unjustified enrichment claims do not lie for use value. Or at least, claims which are sourced in the unjustified enrichment provisions of the BGB do not lie. If one were to ask why it is that a plaintiff can claim for the use value under §§ 987 ff, it would seem that the answer is that otherwise the defendant would be unjustly enriched.25 The use value, which belonged to the plaintiff, was enjoyed by the defendant, and so there was a transfer of wealth without a legal basis. But the measure of recovery does not include the value of ownership, and the rei vindicatio is preserved. This was the position suggested for Roman law, in the absence of furtum. The parallel is heightened by the fact that in those cases where title does not pass but nonetheless the “owner-possessor relationship” does not govern, an unjustified enrichment claim under § 812 is allowed for the value of possession, and indeed modern German lawyers still refer to it as the condictio possessionis.26
4. Quebec Law
In the Civil Code of Lower Canada, as in the French Civil Code, there was no general action for unjustified enrichment. There was a regime governing the management of the business of another (negotiorum gestio), and there was a claim for reception of a thing not due (réception de l’indu), reflecting one of the Roman condictions, the condictio indebiti.27 However, in Quebec as in France, a general action was recognized by the courts under the rubric of the actio de in rem verso.28 The general action is now codified in the Civil Code of Quebec, artt. 1493-6.
There are provisions in the Civil Code which perform a similar function to those in the BGB on the “owner-possessor relationship.” Artt. 928 ff deal with the effects of possession, and generally regulate the position of a possessor who is not the owner. On the other hand, artt. 1699-1707 govern “restitution of prestations.”29 Their applicability is set out in art. 1699 and via certain other provisions;30 the effect is that someone like a finder or a thief of property would be subject to artt. 931-2, but one to whom the property had been transferred by the plaintiff would be subject to artt. 1699-1707. Either way, the possessor must of course return the property if possible;31 and both regimes require a bad faith possessor to render account of the fruits and revenues of the property.32 Fruits and revenues do not, however, include use value.33 Under art. 1704, the defendant must account for use value if he was in bad faith, or if use was the primary object of the prestation, or if the property was subject to rapid depreciation. Artt. 931-2 are silent on the matter. Hence there appears to be a gap where the defendant has derived some significant use value, but the thing was not transferred as a prestation; for example, if someone has stolen my horse and used it for a year. It would be natural for this gap to be filled by a general enrichment action. Challies, relying on French decisions and commentators, thought that an enrichment by use value could support the actio de in rem verso.34 So it appears that the Quebec position is quite similar to the Roman and German positions, allowing an enrichment claim for use value only, while preserving the ability to revendicate.
In these systems, outside furtum in Roman law, it seems you cannot measure an enrichment claim by the value of ownership where ownership has not passed. The enrichment claim is not permitted to supplant the rei vindicatio. But furtum shows the possibility of another solution, one which is arguably adopted by the common law. That is, through the use of appropriate doctrinal tools to avoid over-compensation, it is possible to create a relationship of elective concurrence between the enrichment claim and the rei vindicatio. So the question becomes, why has this possibility been resisted? Why is the relationship instead one of subsidiarity?
This section will be concerned to lay out a brief comparative overview of some different kinds of subsidiarity applicable to unjustified enrichment claims in different systems. In the next section, an attempt will be made to understand the phenomenon of subsidiarity. It is, however, necessary to begin with definition and differentiation, because subsidiarity is a concept with different meanings. One understanding of it is as a kind of opposite to concurrent liability. On this approach, subsidiarity is a relationship between different types of claims such that one type of claim is disallowed by the presence of another claim.35 If unjustified enrichment were subsidiary in this way to the rei vindicatio, then if the rei vindicatio were available, a claim in unjustified enrichment would not lie even if all of its elements were established. If, on the other hand, the rei vindicatio could not be made out, the claim in unjustified enrichment would be permitted. As we have seen, this appears to be the law of Quebec and of Germany.
Then there is a much stronger idea of subsidiarity, which denies the availability of a claim in unjustified enrichment due to the applicability of some other set of legal principles, even if, according to those principles, no claim will lie. An example will serve. Assume that an occupier of land, who is not the owner, has made improvements to the land. If a codified system has a set of provisions which deal specifically with such improvements, and if, according to those provisions, the occupier has no claim, then a court would probably also deny a claim based on a general principle against unjustified enrichment.36 The important point to notice is that here, the plaintiff has no claim at all. Weak subsidiarity, as discussed in the previous paragraph, only directs a plaintiff to the correct claim; strong subsidiarity can deny the plaintiff any claim. It can also be said that while weak subsidiarity is a relationship between claims, strong subsidiarity is better understood as a relationship between legal dispositions or sets of rules.
It will be argued below that each of the systems under consideration makes unjustified enrichment strongly subsidiary in some circumstances. It would be possible for a system to make unjustified enrichment claims weakly subsidiary to all other claims, and indeed it appears that this is the law of Quebec. It would not, however, make sense for a system to make unjust enrichment strongly subsidiary to all other rules of law. The effect would be that there could never be a claim in unjustified enrichment.37 This can be illustrated by a recent French case, in which the plaintiff sought recourse by an action of guarantee as well as an action de in rem verso.38 The action of guarantee was rejected since no fault was shown on the part of the defendant, but the claim in unjustified enrichment was allowed. The defendant appealed on the ground that this ignored its subsidiary character, but the Cour de cassation rejected the appeal. One might view the decision as an occasion for dispensing entirely with subsidiarity;39 but it can be understood more narrowly, as holding that there was no strong subsidiarity between the action of guarantee and the action in unjustified enrichment. In that light, it does not touch the possibility of a general weak subsidiarity, nor the need for strong subsidiarity in some cases.40
1. Strong Subsidiarity
The first step will be to examine strong subsidiarity. That is, in what circumstances do other legal regimes exclude the possibility of a claim in unjustified enrichment, even where the elements of the claim are present, and even where the plaintiff has no other claim against the enriched defendant?
(a) Excluding Claims due to the Relationship Between Plaintiff and Defendant
Strong subsidiarity often operates based on the legal relationship between the plaintiff and the defendant. There are a number of examples.
(i) Illegal, Void or Unenforceable Transactions
Consider the case where some statutory provision comes into play to deny the plaintiff a right which it would otherwise have. Take the case of an illegal contract under which the plaintiff has conferred a benefit upon the defendant. A rule of law operates to take away the plaintiff’s ability to sue for contractual performance; can the plaintiff nonetheless sue in unjustified enrichment to recover the benefit it has conferred? All legal systems have struggled with this question.41 It can also arise where the contract is made merely unenforceable or void, rather than illegal. It is a question of trying to determine the intention of the legislator; would allowing the enrichment claim subvert the goals of the rule which made the contract illegal or unenforceable?42 It is clear that in any system, an unjust enrichment claim must be excluded by any legislative provision which implicitly denies it.
(ii) Different Types of Unjustified Enrichment Claims
The same reasoning can apply to the case in which a system provides more than one type of claim for unjustified enrichment. It might be that a plaintiff will not be allowed a free choice among them, even where the facts of the case satisfy more than one claim. Such a doctrinal rule could be justified where a general unjustified enrichment claim is provided along with other unjustified enrichment claims which apply only to particular fact patterns. For example, in Quebec there is a general enrichment action and also the action for réception de l’indu. It was held, under the Civil Code of Lower Canada, that the general claim is not appropriate where the facts fit the claim for réception de l’indu, even though the latter claim could not succeed.43 Another example is provided by artt. 955 ff, which govern the position relating to a landowner’s obligation to pay for improvements to land; there is no room for the general enrichment action where these provisions are apt to decide the case, even if no claim lies under them.44 Similarly, in German law the provisions governing the “owner-possessor relationship” expressly exclude any other enrichment remedy on facts within that relationship.45 In both of these systems, where a plaintiff can claim his expenses for managing the business of another, unjustified enrichment is excluded.46 This kind of subsidiarity does not seem to be relevant in the common law system, which does not have a general enrichment claim alongside more specific ones.47
(iii) Unjustified Enrichment and Contracts
Unjustified enrichment claims are not allowed where the matter in issue is dealt with by a subsisting contract between the parties. In that case, it is said, the contract governs, and only if it can be disposed of in some way is a claim in unjustified enrichment available.48 We might initially think of this as an example of weak subsidiarity, on the view that rights in unjust enrichment are subsidiary to the parties’ contractual rights. On a closer examination, however, it appears that the governing principle is strong subsidiarity.
We cannot say that claims in unjustified enrichment are subsidiary to claims in breach of contract, because, in all of the systems under consideration, such claims are alternatives. If a contract is cancelled for breach (and conceptualisations of “cancelled” vary in different systems), the non-breaching party is allowed to choose to recover the benefits it conferred, as an alternative to seeking damages valued by performance. A system may view this claim to recover benefits as a contractual one, or as founded on unjustified enrichment.49 The claim is not one which can be understood as enforcing any contractual promise, and it is arguable that wherever the claim may appear in a civil code, its function is to prevent unjustified enrichment.50
We might try to formulate the relevant principle by saying that enrichment claims are weakly subsidiary to primary contractual rights. This would reflect the general position that there can be no enrichment claim so long as there is a subsisting contract between the parties. Of course, this covers the case where there has been no breach of the contract; but it also deals with the position where there has been a breach, so long as the breach does not lead to cancellation of the contract. Even this, however, does not appear to be quite wide enough. Sometimes, umjustified enrichment is excluded even where there are no primary rights. This can be illustrated by Rillford Investments Ltd. v. Gravure International Capital Corp.51 The plaintiff’s business was to broker mergers and acquisitions. The defendant wanted to be acquired and it entered into a contract with the plaintiff providing for the payment of a healthy commission to the plaintiff, should the plaintiff arrange for the acquisition of the defendant by another corporation. The terms of the contract provided that the arrangement would end after 60 days, but that the fee would be payable if the defendant were acquired within 365 days by a company introduced by the plaintiff. The plaintiff introduced a potential buyer, Graphic Corp., but no sale was agreed. Two and a half years after the agreement was executed, Graphic Corp. acquired the defendant. The plaintiff sued, relying on implied contract and unjust enrichment, but the claim was rejected. Although the contract said nothing about liability in unjustified enrichment, the court held that it “contemplated the possibility that the plaintiff would receive no compensation if the defendant was enriched by virtue of the sale of his business beyond the time of the expiry of the agreement.” By the time all of the facts had occurred which allegedly generated an unjustified enrichment, there was no contract; there were no primary or secondary obligations. And yet somehow the contract excluded the enrichment claim. The decision was made under the common law, but one could expect a similar holding in each of the systems under consideration. If this be right, it follows that the unavailability of unjust enrichment in the contractual context cannot be understood through weak subsidiarity. Rather, the existence of a relevant distribution of risks and rewards between plaintiff and defendant excludes unjustified enrichment, even though the plaintiff has no other claim. This is strong subsidiarity.
At this point it must be observed that Stephen Smith has now argued that for the common law, there should be concurrent liability in contract and unjustified enrichment just as there is between contract and tort.52 The gist of the argument is the same as that which eventually prevailed in the debates about contract and tort: that is, the only question is whether the elements of the different causes of action can be established, and if they can, then both types of claim are available. Clearly, this argument depends on the absence of any governing principle of subsidiarity, and it must be assessed in the light of the justifications for this principle which are discussed below.
(b) Excluding Claims due to Relationships Involving Third Parties
In the previous section, it was found that where there is a relevant distribution of risks and rewards between plaintiff and defendant, then in general enrichment claims are excluded. Here we need to consider some slightly more complex situations, namely where there is no contract between plaintiff and defendant, but there is a contract between one or the other of them and some third party.
(i) Plaintiff’s Contract with a Third Party
Consider first the case in which the plaintiff has a contract with some third party. This can be illustrated by the facts of the arrêt Boudier,53 the case in which the Cour de cassation recognized the actio de in rem verso as a general enrichment remedy. The plaintiff contracted with a lessee of land to fertilize the land, and did so. The plaintiff was unable to recover the price because the lessee was insolvent. The plaintiff sued the lessor, who by that time had taken possession of the land. Recovery in that situation on the basis of unjustified enrichment raises certain difficulties. The plaintiff entered into a legal relationship with the lessee which provided for the payment for the fertilizer, and, with his right to payment still intact (albeit impaired by the lessee’s insolvency), he was allowed to recover from another defendant. The policies will be discussed further below,54 but it may be observed here that Challies noted that in two cases in 1939, the Cour de cassation disallowed claims in similar fact patterns.55 The Civil Code of Quebec seems clearly to deny recovery such a case, as art. 1494 provides, “Enrichment or impoverishment is justified where it results from the performance of an obligation.” There is no stipulation that it has to be an obligation owed to the person who was enriched.56 If the plaintiff was performing an obligation, his impoverishment was justified, and under Quebec law (as in France) the claim lies only if both the enrichment and the impoverisment were unjustified.57
The common law does not seem to have found its way to any firm doctrinal rule, but most cases deny recovery in this type of situation. Canadian cases sometimes cite the plaintiff’s contract with a third party as the “juristic reason” for the defendant’s enrichment.58 Lord Goff has suggested that “the existence of a remedy in restitution in such circumstances must still be regarded as a matter of debate,” but that “serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract.”59 Dawson said that the denial of recovery was “almost unchallenged” in U.S. law.60 He said “almost” because he noted a line of cases in which lawyers were allowed to recover from those whom their work had benefited when they were unable to enforce their contractual claims. He was not overly impressed by the “success of American lawyers in escaping their self-imposed limitations”;61 but Canadian lawyers seem to have taken up the torch. In Giffen, Lee & Wagner v. Zellers Ltd.,62 Zellers was sued in negligence by another party. The action was taken over by its liability insurers, who retained the plaintiff law firm. The plaintiffs arranged a tentative settlement and sent an account for $3,220 to the insurer, which by then had become insolvent. The law firm successfully sued Zellers for this amount in unjust enrichment. To be fair, there is at least one recent case allowing recovery where the plaintiff was not, so far as can be discovered, a lawyer.63
In Peter Birks’ contribution to this volume, he takes the view that the reason the plaintiff cannot recover in a case like this is that the defendant’s enrichment is not at the expense of the plaintiff. On our assumptions, though, the plaintiff can prove all of the elements of his enrichment claim against the defendant, and it is only the presence of the plaintiff’s contract with another party which bars the claim. In other words, saying that the enrichment was not at the plaintiff’s expense is just a conclusion of law which is reached by applying a principle additional to the basic one which requires only that the plaintiff conferred the enrichment on the defendant.64 The present paper is attempting to analyse this additional principle.
If we consider the position on this point in Germany, the law is absolutely clear; there can be no claim in unjustified enrichment where the enrichment was conferred pursuant to a contract between the plaintiff and some other party. As a matter of doctrinal development of the words of § 812 of the BGB, German law distinguishes between cases where the enrichment can be described as a “performance” (Leistung), and cases of enrichment in any other way. In this context, a performance means an enlargement of another’s estate which is brought about intentionally and with a specific purpose in mind.65 “The concept ofLeistung serves as a compass in this territory; once one has found who has performed to whom, one will normally know the right plaintiff and the right defendant for an action in unjustified enrichment.”66 The German rule of subsidiarity is that whenever there has been a performance, there can be no claim based on enrichment in any other way.67 If the plaintiff enriched the defendant pursuant to the plaintiff’s obligations under a contract with a third party, then there has been a performance between the plaintiff and the third party. Any enrichment claim by the plaintiff against the defendant is excluded.68
(ii) Defendant’s Contract with a Third Party
Briefly we can consider another type of case. What if it is the defendant who is in a contractual relationship with some third party, which relationship contemplates the provision of the enrichment by the plaintiff? One feature of this type of case is that even in the absence of any rule of subsidiarity, the claim may fail as the plaintiff may be unable to prove that the defendant was enriched. The defendant will be liable to pay, or will already have paid, the third party under the contract.69 On the other hand, in the common law at least, a defendant’s attempt to deny its enrichment on the basis of dealings with a third party is usually understood as a matter of defence.70 This is parallel to the discussion above, in the case of the plaintiff’s contract with a third party;71 the denial of recovery in such cases can be explained on the basis that the defendant’s enrichment was not “at the expense of” the plaintiff, but the reasoning behind that conclusion must be unearthed.
Even though we are assuming here that the plaintiff was not bound contractually to anyone, this does not mean that the claim against the defendant is the plaintiff’s only possible recourse. Why might the plaintiff have enriched the defendant? Although there are other possibilities, it is most likely that the plaintiff was attempting to fulfil its obligations under a contract with some other party which turns out to be void or unenforceable.72 This might be the same third party with whom the defendant contracted, or a fourth party. Under German law, since in this case the plaintiff was making a performance toward his contractual counterparty, his only claim will be an enrichment claim against that counterparty. Quebec law appears to generate the same conclusion. Liability for unjustified enrichment under art. 1493 is defeated if either the defendant’s enrichment or the plaintiff’s impoverishment is justified; under art. 1494, “Enrichment or impoverishment is justified where it results from the performance of an obligation.” So in this case of defendant’s contract with a third party, it could be argued that the defendant’s enrichment is justified, since it resulted from the performance of the obligation of the third party.73 There is no stipulation that the obligation must be owed by the plaintiff. In the common law, there does not appear to have emerged any trend toward denying the plaintiff an enrichment claim against the defendant, but there are very few cases which are not also “combination” cases as discussed immediately below.74
Many cases involve a combination of the plaintiff’s contract with a third party and the defendant’s contract with a third party. It might be that the plaintiff and the defendant each have a contract, but each has contracted with a different party. More likely, the plaintiff and the defendant have each contracted with the same third party. That is the case which arises where a building project involves a general contractor and subcontractors. The owner of the site contracts with the general contractor, and the general contractor contracts with subcontractors. If the general contractor becomes insolvent, can the subcontractors sue the owner in unjustified enrichment? There will often be legislative solutions to assist the subcontractors, such as the possibility of registering a real security interest in the land, or a statutory trust fund of payments made by the owner to the general contractor which is for the benefit of subcontractors. Such solutions are motivated of course by policies aimed at protecting the subcontractors, and cannot be seen as reflecting the general law.75 Moreover, such remedies cannot affect the enrichment claim except in a system with a wide-ranging subsidiarity principle.76
Since this combination involves both a plaintiff’s contract with a third party and a defendant’s contract with a third party, it follows that if either of those configurations denies the plaintiff its enrichment claim, there can be no claim here. Some recent common law cases seem to support this view.77 Unfortunately, the simple denial of recovery in such a case does not make clear which of the two contracts is keeping the plaintiff from recovering.78
2. Weak Subsidiarity
The widest possible principle of weak subsidiarity would provide that a claim in unjustified enrichment was unavailable where the plaintiff had any other claim against some defendant. For example, if the plaintiff could establish all of the elements of an enrichment claim against the defendant, but it transpired nonetheless that the plaintiff held a tort claim against some third party, the enrichment claim would be disallowed. No system seems to have a principle as wide as this. An argument along these lines was made and rejected for Quebec law under the Civil Code of Lower Canada.79
The widest possible version of weak subsidiarity operating inter partes would say that if the plaintiff has any other claim against the defendant, unjustified enrichment cannot be used. This appears to be the law of Quebec, in respect of the general enrichment action, because art. 1494 of the Civil Code of Quebec provides that enrichment or impoverishment is justified where it results “from the failure of the person impoverished to exercise a right of which he may avail himself or could have availed himself against the person enriched.”80 A general doctrine of weak subsidiarity of unjustified enrichment would explain the non-availability of an enrichment claim where the rei vindicatio subsists, the phenomenon observed for Germany and Quebec in Section II of the paper. An argument has been made that the common law takes a similar line.81
It would appear, however, that the German version of subsidiarity is not as wide as that prevailing in Quebec. The reason is that a generalized weak subsidiarity must make unjustified enrichment claims unavailable where there is a claim based on a wrong. If, as is suggested by the language of art. 1494, this is the law of Quebec, then it would be another reason for disallowing an enrichment claim in the case of the stolen horse under Quebec law.82 But in German law, unjustified enrichment is not subsidiary to the law of wrongs.83 Nor has it been suggested, to my knowledge, that there is any such subsidiarity in the common law. So in these systems, a narrower principle applies.
A final point can usefully be addressed before attempting to understand the reasons for subsidiarity. It relates to prescription. Assume that an unjustified enrichment claim is subsidiary to another claim; make it a claim for breach of contract, where the contract has not been terminated by the breach. Now assume that the contractual claim is prescribed by the passage of time. Does it still preclude the enrichment claim? The principle in all systems appears to be that it does.84 This might be thought to indicate a relationship of strong subsidiarity, since the claim in unjustified enrichment is denied even though the other is unavailable. Conversely it might be thought to be inconsistent with a relationship of weak subsidiarity; that only operates when there is another viable claim. It does, however, seem possible to reach this result even if the relationship is one of weak subsidiarity. This involves treating the case of a prescribed claim in the same way as a viable claim, rather than treating it like the situation where the substantive elements of the claim cannot be established.85 It appears therefore that conclusions about the nature of the subsidiarity relationship cannot be drawn from the treatment of prescribed claims.
IV. Understanding Subsidiarity
1. A Model of Subsidiarity
The preceding comparative study suggests that subsidiarity is a general feature of the law of unjust enrichment, although the strength of the subsidiarity principle varies widely from system to system and even within each system. This section is an attempt to understand what might justify this subsidiarity. I am not primarily concerned here with the way in which subsidiarity is worked out in doctrinal terms. In those terms, a claim may be denied in one system due to a recognised principle of subsidiarity; in another system, it may be denied because the defendant’s enrichment is said not to be at the plaintiff’s expense. The concern here is with making sense of the results, in terms of principle.
It does not appear that strong subsidiarity can be justified by a desire for orderliness in our legal categories. If claims exist, it is presumably to meet the demands of justice, and therefore any principle which will deny an otherwise existing claim must be one with more normative weight than this.86 It might be possible to understand weak subsidiarity in this way, since weak subsidiarity only orders claims and cannot exclude them. Even here, however, substantive rights are affected and one would hope for a better justification.87
Another possible justification might be the general principle that the specific overrides the general. This certainly comes to mind when we consider how codified systems make the general unjustified enrichment claim strongly subsidiary to a more specific regime. This result can be seen to derive directly from the implied intention of the legislature; but the same principle could be deployed in a wider way, if unjustified enrichment claims could somehow be understood as more general in their application than such things as the terms of a specific contract. A well-known feature of the French legal tradition is its refusal to allow concurrent liability in contract and in delict, which may be understood as based on a philosophy that the specific terms of a particular contract should govern in preference to a general law of fault, especially one so general as is usual in the French tradition. But this understanding would explain too much and too little at the same time. It would explain too little, because there are elements of strong subsidiarity for unjustified enrichment claims even in systems, like German law and the common law, which have no general aversion to concurrent liability. It would explain too little, because in the French legal tradition unjustified enrichment claims are subsidiary (albeit weakly so) even to delictual claims, and it is difficult to see how this could be explained on the basis that the delictual claim is somehow more specific than the claim in unjustified enrichment.
What seems to be needed is a conviction that unjustified enrichment claims serve a corrective role.88 In the common law, some parts of unjust enrichment come from Equity, such as the resulting trust. But even those parts of the law which are rooted solely in the common law can be said to be derived not from Equity, but from equity. So said the great common law judge, Lord Mansfield;89 and civilian lawyers, who have nothing to do with Equity, also view unjustified enrichment as based on equity. In both France and Quebec, the need for this corrective was so strongly felt that a whole head of liability was created by the courts outside of the civil code, and the basis for this step was équité.90 The impetus for the inclusion of a general enrichment action in the BGB came from von Gierke, who viewed it as equitable in nature.91 This only means that it is a corrective.
The idea of one part of the law operating so as to correct other parts of the law is a slightly curious one. It makes sense in relation to laws which are of different orders, as where a statute is declared void due to its inconsistency with some constitutional principle. This may be why some German jurists have, in the past, viewed unjustified enrichment as a kind of higher law.92 But paradoxically, to the extent that it is subsidiary, it is a kind of lower law. In fact, “correction” by a disposition of a higher legal order is just the natural outcome of that hierarchical structure; the higher order governs the lower. It is when the parts of the law in question are of the same order that correction is more difficult to conceptualise.
What follows from the conceptualization of unjustified enrichment as corrective of other parts of the law, while yet being of the same order as those other parts? We can find a parallel in that other great corrective system, Equity. One of the “maxims of Equity” was (or is, depending on one’s view of such things) that “Equity supplements but does not contradict the common law.” This is, at the same time, fundamentally important and completely false. It is false inasmuch as any supplementation amounts to a kind of contradiction. There is no point in having a second, supplementary set of rules unless it changes the outcome which the first set would give. On the other hand, the maxim is fundamentally important in the sense that it was the whole basis for the creation of Equity. When the first Chancellors enforced the first uses against legal title holders, the suggestion that they were contradicting the common law would have appalled them. They were merely requiring those people to behave according to good conscience (and telling them what good conscience required). Of course Equity developed into a set of legal rules, but the same reasoning holds: having a second set of rules only makes sense if the second set “supplements but does not contradict” the first set. If you wanted to contradict the first set, you would just change it. How can the circle be squared? For one legal regime to correct another, without possessing the authority of belonging to a higher legal order, it must in a sense go to a lower level; it must defer, at least nominally, to that which it corrects. Equity corrects the common law, but it cannot correct too much, or too obviously; the correction cannot lay itself open to the charge of being a contradiction.93 So, down the centuries to the present day, there are those who want Equity to do more, and those who want it to do less. Among the latter, there are concerns about containing it. Another consequence of the corrective nature of Equity is that it is very difficult to define it in any positive way: you cannot understand what it is without understanding that it is a corrective, and without having at least some grasp of that which it corrects.94
The parallels with unjustified enrichment are striking. It is a corrective, and just as in the case of Equity, this makes it difficult to define positively.95 It can only be understood in the light of that which it corrects. Furthermore, since this corrective regime does not stand higher in the legal order than which it corrects, it must not correct so much as to contradict. Moreover, the concerns with containing unjust enrichment liability are always to the fore.96 So the question becomes, what are the limits? When will correction amount to contradiction? The main difficulty here (and this is a problem in the relationship between the common law and Equity as well) is what might be called “negative implication.” This name is borrowed from a doctrine (its status now uncertain) of Canadian constitutional law.97 Sometimes it is possible for a provincial legislature and the federal Parliament to both pass legislation which overlaps in its effects, each level of government being able to point to one of its jurisdictional powers to justify the act which it has passed. If the two pieces of legislation conflict, the federal legislation prevails under another doctrine called “paramountcy.”98 But do they conflict? This is where negative implication might have a role to play. Here is a simple example.99 The federal Parliament, under its power over banking, passed legislation which provided rules for taking and enforcing a kind of security interest. The provincial legislation, under its power over property and civil rights in the province, passed legislation which required formal notice to the debtor before property subject to a security interest could be seized. The two regimes did not conflict in the sense suggested by many other cases, because it was perfectly possible for a bank to comply with both the federal and the provincial rules. But the doctrine of paramountcy was held to apply. In passing its legislation, the federal Parliament implied certain things, including that seizure could not be made more difficult by a notice requirement. The provincial legislature must avoid conflict not only with what the federal act says, but with what it implies is not to have anything said about it. It is as though the federal act casts a shadow beyond its express provisions, which the province must not enter. One expression sometimes used is that the federal Parliament has “occupied the field.”
If this framework can be used to understand subsidiarity, then we can say that to different extents, corresponding to different conceptions of subsidiarity, the law of unjustified enrichment is not supposed to contradict the effects of other legal institutions. Weak subsidiarity sees a contradiction only where another recourse actually exists. Strong subsidiarity incorporates the idea of “negative implication,” so that in assessing whether or not there is a contradiction, we must determine the extent to which other legal institutions cast shadows which unjustified enrichment cannot enter. Unjustified enrichment must yield to the positive dispositions and also to the negative implications of those other legal institutions.
2. Implications of the Model
Let us first apply this concept to the phenomenon, discussed earlier, of the exclusion of unjustified enrichment claims by statutory implication. A statute makes a contract unenforceable; can the plaintiff claim in unjust enrichment for benefits transferred? We have to ask whether the policy which made the contract illegal or unenforceable excludes the enrichment claim. In other words, do the provisions which nullify the contract cast a shadow over the law of unjustified enrichment as well? Have they occupied the field? Here the relationship between the statute and the enrichment claim is clear, because these dispositions are of different legal orders. In other areas the matter may be less clear.
(a) Unjust Enrichment and Contract Law
We can start by looking at the relationship between contract and unjustified enrichment. The comparative study above suggested that all legal systems make unjustified enrichment strongly subsidiary to the law of contract: the existence of a contractual regime can exclude an enrichment claim, even where there is no contractual claim. On the present analysis, this means that unjustified enrichment is viewed as in some sense corrective of contract. Or, perhaps more precisely, unjustified enrichment is corrective of something with which contract tends to deal; so that if contract does deal with it, there is no room for correction. Can this case be made? There are many ways of understanding what contract is about. Maybe it is about keeping promises, maybe it is about wealth maximization, maybe it is about reasonable reliance. But on any view, it seems, contract is about the transfer of benefits, in the sense that what people do, or promise to do, under contracts is thought by the other party to the contract to be of some benefit. Unjustified enrichment, at least over much of its range, is about the reversal of non-consensual transfers of benefits.100 If contract law deals with the consensual transfer of benefits, it makes sense that unjustified enrichment, dealing with defective or non-consensual transfers, should stand in a corrective and subsidiary role to contract.101
Clearly, then, between the parties to the contract, the contract casts a long shadow. It occupies the field relating to the transfer of benefits within the contractual framework. The length of the shadow which is cast is a matter of interpreting the contract to decide whether or not it dealt with the benefit in issue, even if only in a negative way. In Hoffman v. Sportsman Yachts Inc.,102 the plaintiff was buying a boat from the defendant for $174,345. There was a term which provided for the price to rise, and on delivery the defendant relied on this and demanded $202,500. The plaintiff paid but then sued to recover the difference of $28,155, arguing that the term was not enforceable. For reasons which are immaterial here, the judge agreed that the contract had to be read without this term. So amended, the contract had nothing to say about the extra $28,155. One of the things which the contract was very much about was the price of the boat, but without the disputed term, the $28,155 was not referable to the price, even though it was paid as part of the price. It was therefore recoverable. If that result seems obvious, recall Rillford Investments Ltd. v. Gravure International Capital Corp.,103 which was discussed earlier. The plaintiff conferred a benefit long after the contract between the parties had ended, but the court held that the contract “contemplated the possibility that the plaintiff would receive no compensation if the defendant was enriched by virtue of the sale of his business beyond the time of the expiry of the agreement.” This is clearly an example of negative implication.
So sometimes a claim in unjustified enrichment may be denied even where there is no continuing contractual tie between the parties. The consensual distribution of risks and benefits can continue to govern, excluding unjustified enrichment, even when the contract has ceased to operate. Conversely, there might be cases where a claim would be allowed even though the matter was governed by a contract. If the plaintiff owed the defendant £50 for work done, and the plaintiff paid when the defendant threatened him with personal violence, it might well be that the money would be recoverable. The matter is governed by a contract, but the consensual distribution of risks and benefits did not contemplate personal violence, and so the unjustified enrichment claim is not excluded.
It begins to appear that unjustified enrichment is not actually subsidiary to contract law as such. Rather it is excluded by an operative distribution of risks and benefits. When we say that there can be no claim in unjustified enrichment so long as there is a subsisting contract, we are making a slightly inaccurate generalisation by aiming at a false target. A subsisting contract usually corresponds to an operative distribution of risks and benefits, but the examples above show that it does not always do so. What implications does this understanding have for the situations discussed above, where the contract is not between plaintiff and defendant but between one (or both) of them and some other party? Can the bargain cast a shadow on third parties? The case of the plaintiff’s contract with a third party seems to be within the principles being discussed here. The plaintiff is party to a regime governing the conferral and receipt of benefits, and that regime remains in force. An enrichment claim against a third party would contradict that regime if the contract is understood in this way: in providing for some counterperformance for what the plaintiff had done, the contract negatively implies that there is to be no other right of payment. The common law, which does not appear to have committed itself yet, may therefore be on the right track in moving, as it seems to be, toward a rule excluding enrichment claims in this situation.104 The common law has a strong commitment to privity of contract, and it might be thought to contradict that to say that the contract between the plaintiff and the third party has this effect on the legal position between the plaintiff and the defendant, who is not a party to the contract. In fact, the privity argument cuts both ways: nobody should have to pay for benefits conferred under a contract to which he was not a party.105 But in the end privity as such seems to be irrelevant, since it is about controlling contractual liability.
This question has been examined most carefully by German jurists, and it is clear that in that system, contracts cast shadows over third parties. The doctrinal reason is that where the plaintiff has rendered a performance (Leistung), no enrichment claim can be brought except against the person who received the performance. Thus, where the plaintiff enriched the defendant pursuant to the plaintiff’s contract with a third party, the plaintiff has no enrichment claim. Moreover, in German law this effect applies even if the plaintiff’s contract is void. His actions still count as a performance and have the same effect. The applicable policies have been elucidated by German jurists, in particular Canaris. He formulated three principles governing the availability of third party enrichment claims in a contractual context.106 These are said to apply where two parties have tried to contract, successfully or not. One principle is that the parties should bear the risk of insolvency of their chosen counterparty. Moreover, the parties should be able to rely upon, and to be bound by, the defences they have against one another. These are the reasons why plaintiffs are not allowed to make claims against third parties. Such claims would be a way of avoiding the effects of the insolvency of their chosen counterparty, or of avoiding his defences. While this learning is very instructive, it is inconsistent with the view which appears to be emerging in the common law, to the effect that void contracts can have no influence on the law of unjust enrichment.107 The difference between the two systems can be understood in this way. German law gives effect to the parties’ transaction as creating and distributing certain risks in relation to the transfer of a benefit, even if the transaction fails to create a contract; and these effects are sufficient to exclude the corrective law of unjust enrichment. The common law takes the voidness of the contract to exclude any legal effects whatsoever.
The German approach might well be considered more sophisticated in this regard. We have already seen that even within the common law, it is inaccurate to say that unjust enrichment claims are excluded by contract. That statement is, in extreme cases, both too wide and too narrow. The point can be further tested by recalling the example of the building project. The owner contracts with the general contractor, and the general contractor contracts with the subcontractor. Can the subcontractor sue the owner in unjustified enrichment? Surely not, if both contracts are valid; and the same result must follow if both were valid, but are now terminated by complete performance on both sides. By imagining that one or both of the contracts is void we can test what really bars the action. German law will tell us that the subcontractor can never sue the owner in unjustified enrichment even if both contracts are void; and the theoretical underpinnings for that position seem formidable.
The position in Quebec makes an interesting contrast. Under the Civil Code of Lower Canada, following French law, it would appear that the plaintiff who had a contract with a third party could not prima facie sue the defendant in unjustified enrichment. This result was superseded, however, in the case in which it mattered most: when the third party was insolvent. This was the situation in the root case of the whole body of jurisprudence.108 It was sometimes explained doctrinally by saying that the action de in rem verso was not subsidiary to another claim if there was a factual obstacle to that other claim.109 To the extent that the insolvency policies discussed above are accepted, however, this result seems difficult to justify. The wording of art. 1494 of the Civil Code of Quebec appears apt to alter this result for the future; it provides that “Enrichment or impoverishment is justified where it results from the performance of an obligation.”110
The analysis based on a consensual distribution of risks can also be used to deal with another point. In Kleinwort Benson Ltd. v. Lincoln City Council,111 the House of Lords allowed a claim based upon mistake of law, even though the swap transaction under which the payments had been made was fully executed. One of the arguments by which the defendants tried to resist payment was based upon the logic of mistake. It was said that in such a case, the force of the mistake was spent.112 The argument in those terms was rejected, as it had been in earlier litigation where the claim was based on failure of consideration.113 In other words, the “executed transaction” defence does not seem to work when it is tied into the logic of unjust factors. A mistake is a mistake, and a failure of consideration remains one, even where the transaction is fully executed. But if we recognise that unjust enrichment is excluded by the existence of an operative distribution of risks and rewards, that could be used to build an independent principle which excluded claims in such cases. The distribution of risks was fully realised, leaving no room for unjust enrichment. This of course would also depend on following the German lead in recognising that such an effect can occur even where the contract embodying the distribution is void.
This argument is not intended to imply that the case itself was wrongly decided, but the result may turn on the fact that the defendant was a public body which lacked capacity to enter into the transaction. Allowing restitution can be seen as necessary to give full legal effect to that lack of capacity, which is imposed as a protection for the defendant’s constitutuents.114 This permits a final point to be made. The argument in this section has been that subsidiarity in the context of contracts turns on the idea that a relevant consensual distribution of risks and rewards ousts unjustified enrichment, to the extent that the latter is based on non-consensual transfers of benefits. The discussion of Kleinwort Benson Ltd. v. Lincoln City Council emphasises that in some cases, liability in unjustified enrichment is not based on the defective consent of the plaintiff to the transfer of wealth in question.115 If the argument herein is correct, then in exactly those cases we should expect to find that the existence of any consensual distribution of risks and rewards cannot exclude liability in unjustified enrichment.
(b) Unjust Enrichment and Property Law
We now turn to the interaction between the law of unjustified enrichment and actions which vindicate property rights. The earlier analysis suggested that enrichment claims are subsidiary to the rei vindicatio in German and Quebec law. As was mentioned above, unjustified enrichment, in the widest sense, is about the reversal of defective transfers of value. Some such transfers are by way of services, but many are by way of transfers of property. So it seems justifiable to say that one function of unjustified enrichment is as a corrective of property transfers, which would suggest that unjustified enrichment would be subsidiary to actions which vindicate property rights. As was mentioned above, this has been suggested as the common law position, but the matter is far from clear.116 It is complicated by the absence of any rei vindicatio for movables in the common law system. Property in movables is protected by the law of wrongs, and it is not suggested that unjust enrichment is subsidiary to the law of wrongs. On the other hand, there is a rei vindicatio for immovables, and it may well be that a claim in unjust enrichment, measured by the value of ownership of an immovable, would not lie where the plaintiff still held ownership of the immovable.117 Similarly, Equity can provide the equivalent of a rei vindicatio in the form of a declaration of trust and consequential orders, and it has been held that no claim in unjust enrichment lies where the plaintiff retains its Equitable ownership of the transferred asset.118 In other words, wherever a rei vindicatio is potentially available, its actual availability seems to preclude unjust enrichment.
We may ask whether the subsidiarity is strong or weak. Even though unjustified enrichment can be understood as corrective of property dispositions, their interaction does not seem to generate the same concerns about “negative implication” as does the interaction of unjustified enrichment and contracts. The presence of a rei vindicatio may exclude an enrichment claim–this is weak subsidiarity–but the absence of any claim which vindicates property will not generally do the same. In other words, the fact that property has passed to the defendant does not, by itself, generally exclude an enrichment claim. While a contract creates a regime for the consensual transfer of benefits, a property transfer is not so much a regime as it is an event, albeit one which may occur within a contractual regime. As a result, a transfer of property does not in itself cast a shadow which excludes unjustified enrichment; any such shadow is cast by the context in which the transfer is made. A transfer of property made outside of any contractual context is indeed commonly the very occasion for an unjustified enrichment claim, aimed at the recovery of the property or its value.
If unjustified enrichment is generally only weakly subsidiary to property transfers, there is one apparent exception. Assume that the plaintiff transfers possession of a thing to another party, X, while retaining ownership. X then transfers possession to the defendant, in circumstances which give the defendant ownership of the thing, without the plaintiff’s consent. Here we find that the plaintiff has lost ownership, and the defendant has acquired it; but any claim in unjustified enrichment will be excluded.119 The rule by which the defendant acquired ownership here casts a shadow which negatively implies that there may be no enrichment claim. But this exception is more apparent than real. The acquisition of ownership by the defendant in such a case is not merely an event; it is also part of a transaction between the defendant and X. This activates the considerations discussed in the previous section. The rule which gives ownership to the defendant is designed to protect the transaction between the defendant and X, and this protection ousts the plaintiff’s enrichment claim.
The position in the common law (understood broadly so as to include Equity) is also complicated by the existence of trusts raised to reverse unjustified enrichment. On its face, this phenomenon seems clearly inconsistent with any relationship of subsidiarity between unjust enrichment and claims protecting property. But on further examination, this does not appear to be the case. If an asset is transferred at common law in circumstances which amount to an unjustified enrichment of the defendant, the common law will allow a personal claim to recover the value. The common law, viewed on its own, is like a civilian system in this regard; the law of unjust enrichment may step in to correct (but not to contradict) the property transfer, by creating an obligation. There is no difficulty about subsidiarity, because there is no rei vindicatio. Equity, however, adds another layer of correction to the analysis. It has long been established that the principle of non-contradiction which operates between common law and Equity does not prohibit interfering with common law ownership; that is the basis of all uses and trusts. Nor does it prohibit the addition of Equitable proprietary rights to common law personal rights. Unjust enrichment as it operates through Equity has different tools at its disposal than unjust enrichment operating through common law.
(c) Unjust Enrichment and Wrongs
Finally, we may turn to the law of wrongs. In the German system and the common law, there is no general subsidiarity principle between wrongs and unjustified enrichment. It would appear that we can infer that for these systems, there is no sense in which unjustified enrichment stands in a corrective relationship to the law of wrongs; they do not deal with the same kind of matter.120 Wrongs are not, in general, concerned with transfers of benefits. But this brings us to the widest subsidiarity principle, that which applies to the general enrichment action in Quebec. If the plaintiff has a claim based on extracontractual fault, or even used to have one which is now prescribed, it appears that there can be no general enrichment action. The generally subsidiary character of the general unjustified enrichment claim in Quebec law suggests that its relationship to all other parts of the legal system is conceived as a corrective one.
It is difficult to understand how it can be thought to have this relationship to the law of wrongs, but a historical explanation seems best. The general enrichment action in the form of the actio de in rem verso was an extra-codal development. This perhaps inevitably lent it a generally subsidiary air; in a system with a general civil code, an extra-codal liability, created judicially, exists almost in a different legal order from the provisions of the code.121 This historical explanation fits with the observation that the action for the reception of a thing not due, which was always in the Code, is not subsidiary to the law of wrongs.122 It also fits with the observation of other jurisdictions.123 This difference between the general action and the action for the reception of a thing not due is otherwise quite puzzling, since on any view the latter is a special case of the former.124 If this is right, then one might question the choice made for the new Civil Code of Quebec, to codify the general subsidiarity of the general unjustified enrichment claim.125
The relationship between unjustified enrichment and other claims is complex. Understanding it depends not only upon an understanding of the overall function of the law of unjustified enrichment, but also upon the history and philosophy underlying the structure of private law in a particular system. The common law does not know “subsidiarity” by that name, but elements of that relationship appear to be embedded in the law. As the common law of unjust enrichment develops, it can be expected that the policies which have been discussed herein will need to be addressed, and their impact on unjust enrichment liability analysed.
1 St. Hugh’s College, Oxford. I would like to thank Dr. Simon Whittaker for his thoughtful comments, although any remaining errors are my own. I acknowledge with gratitude the financial assistance of the Arts and Humanities Research Board, and also the kind hospitality of the Faculty of Law, McGill University where much of the research for this paper was done and a working version presented. I am grateful for the helpful suggestions I received at that time.
2 “In the very short space of seventy-five years we have created a monster”: J.P. Dawson, Unjust Enrichment [:] A Comparative Analysis (1951), 30.
3 Throughout the paper, I expressly exclude the case where the first transferee has gone on to transfer the thing to some other person, gratuitously or for some exchange value. Such a possibility complicates the analysis considerably. The papers in this collection on ‘Indirect Enrichment’ address the matter.
4 Since later in the paper I will have occasion to refer to “equity” in the civilian sense, I have used “Equity” and “Equitable” where the reference is to that system of law. Although many consider this inelegant, I make no apologies for following the example of such as Professor F.W. Maitland and Sir George Jessel M.R.
5 Citadel General Assurance Co. v. Lloyds Bank Canada [1997] 3 S.C.R. 805, 152 D.L.R. (4th) 411, required a showing of carelessness. See now Twinsectra Ltd. v. Yardley, unreported, 28 April 1999, English C.A., paras. 101-111, apparently assuming that liability depends upon a showing of dishonesty.
6 It would be wider if the unjust enrichment claim did not require the proof of any level of knowledge on the part of the defendant. This position is advocated in P.B.H. Birks, ‘Misdirected Funds: Restitution from the Recipient’, [1989] Lloyds Maritime and Commercial Law Quarterly 296 ff; Lord Nicholls of Birkenhead, ‘Knowing Receipt: The Need for a New Landmark’, in: W. Cornish et al. (eds.), Restitution: Past, Present and Future (1998), 231 ff and J. Martin, ‘Recipient Liability after Westdeutsche‘, [1998] Conveyancer and Property Lawyer 13 ff. It has not yet been adopted judicially. It is arguable that even if a claim in unjust enrichment may arise upon the defendant’s interference with the plaintiff’s Equitable proprietary rights, a level of knowledge on the part of the defendant must be established: L.D. Smith, ‘Property, Unjust Enrichment and the Structure of Trusts’ forthcoming in (2000) 116 Law Quarterly Review.
7 Choice of law rules were in issue in Macmillan Inc. v. Bishopsgate Investment Trust plc, [1996] 1 W.L.R. 387 (C.A.), a case which generated some of the academic discussion relating to the issue now under consideration.
8 W. Swadling, ‘A Claim in Restitution?’ [1996] Lloyds Maritime and Commercial Law Quarterly 63 ff, 65.
9 Kleinwort Benson Ltd. v. Lincoln City Council [1998] 4 All E.R. 513, 542h, [1998] 3 W.L.R. 1095 (H.L.), per Lord Goff.
10 Sadler v. Scott [1947] 1 D.L.R. 712 (B.C.C.A.); L.D. Smith, The Law of Tracing (1997), 291-292.
11 Gaius, Institutes, trans. W.M. Gordon and O.F. Robertson (1988), IV, 4. This text appears in Justinian’s Institutes 4, 6,14.
12 R. Zimmermann, The Law of Obligations[:] Roman Foundations of the Civilian Tradition (1990), 941n152, suggests that the condiction was extended to furtum at a time when the words “dare oportere” (“ought to give”) had not acquired a technical meaning confined to a duty to transfer ownership. Similarly, Institutes of Gaius, Part II, comm. F. de Zulueta (1953), 229: “[Gaius’] explanation is acceptable, though some prefer the doubtful explanation that in primitive times possession even by a thief gave ownership.”
13 The actio furti for damages was available in any case, and could be cumulated with one of (i) the rei vindicatio (ii) the condictio ex causa furtiva or (iii) a contractual action which might lie if, for example, the stolen thing had been deposited with the thief. See Zimmermann (n. 12), 942-943.
14 Zimmermann (n. 12), 942; J.A.C. Thomas, The Institutes of Justinian[:] Text, Translation and Commentary (1975), 295.
15 Institutes of Roman Law by Gaius, trans. & comm. E. Poste, 4 ed. by E.A. Whittuck (1904), 450; this was true whether or not the heir could be shown to have been enriched: P. Pauw, ‘Historical Notes on the Nature of the Condictio Furtiva’, (1976) 93 South African Law Journal 395 ff, 397. The only disadvantage of the condiction was that it could not be brought against a thief who was not free: Pauw, 396.
16 Zimmermann (n. 12), 943. Election occurred earlier in Roman law than in the common law, and the mere bringing of the condiction would eliminate any prospect of revendication.
17 Zimmermann (n. 12), 922-930.
18 Zimmermann (n. 12), 836n20: “The condictio ex causa furtiva survived as the only application of a condictio which could be brought by the owner.” Zimmermann notes that the contrary position is taken in D. Liebs, ‘The History of the Roman Condictio Up to Justinian’, in: N. MacCormick and P. Birks (eds.), The Legal Mind[:] Essays for Tony Honoré (1986), 163 ff, 165 ff.
19 Gaius III, 200.
20 Zimmermann (n. 12), 840 notes that a condiction could be used by a possessor of land who was evicted. See also Liebs (n. 18), 170. The designation of this type of claim based on loss of possession as condictio possessionis clearly shows the focus on possession, although it is not clear whether it sheds light on the question of whether the condictio ex causa furtiva was the only condiction available where title did not pass. The reason is that the condictio possessionis was arguably a sub-category of the condictio ex causa furtiva: Zimmermann (n. 12), 840n40.
21 In particular, Liebs (n. 18), 171 suggests that an owner could bring a condiction against a finder of property. Note also the final words of Gaius II, 79, indicating that a condiction is available against “thieves and certain other types of possessor” (scil., defendants who are not owners but who have not committed furtum). Again, Zimmermann (n. 12), 840 appears to take the view that such claims were subcategories of the condictio ex causa furtiva.
22 For the history, see R. Zimmermann and J. du Plessis, ‘Basic Features of the German Law of Unjustified Enrichment,’ [1994] Restitution Law Review 14 ff, 14-20.
23 Zimmermann and du Plessis, [1994] Restitution Law Review 15 quote König: “The terminology is confusing, almost each statement is disputed, the solution of trivial questions is becoming ever more complicated, and there is a grave danger of a loss of perspective.”
24 See generally B.S. Markesinis, W. Lorenz and G. Dannemann, The German Law of Obligations, vol. 1 (1997), 741-743.
25 988, 993 cross-refer to the provisions on unjustified enrichment.
26 Markesinis et al. (n. 24), 769.
27 Dawson (n. 2), 96, laid the blame for this over-simplification on Pothier. The same view is expressed in K. Zweigert and H. Kötz, Introduction to Comparative Law, trans. T. Weir (3rd ed., 1998), 545-546.
28 In France, in 1892 in the arrêt Boudier, Req. 15.vi.1892, S. 1893.1.281 note Labbé, D. 1892.1.596; in Quebec, not definitively until Cie Immobilière Viger Ltée v. Laureat Giguère Inc., [1977] 2 S.C.R. 67. The actio de in rem verso was not one of the condictions; it was originally applicable only to a narrow range of cases. For the history of how it came to be used as a general enrichment claim, see Zimmermann (n. 12), 878-884.
29 A prestation is the object of an obligation (art. 1373); it is that which the debtor is bound to render to the creditor.
30 Artt. 1422, 1491 (réception de l‘indu), 1606, 1694, 1838. The regime in artt. 1699-1707 does not appear to govern where the general unjustified enrichment claim of artt. 1493-96 applies because (i) there is no cross-reference to artt. 1699-1707 from artt. 1493-96, as there is from other provisions; (ii) the regime in artt. 1699-1707 is inconsistent with artt. 1493-96. For example, art. 1495 in general excuses restitution to the extent that the enrichment has fallen away, but art. 1702 in general does not; and (iii) on facts which give rise to a claim under artt. 1493-96 the benefit received by the defendant cannot generally be seen as a prestation.
31 Artt. 953, 1700.
32 Artt. 931, 1704.
33 See the definitions in art. 910. This is in contrast to the position in German law, where the provisions on the “owner-possessor relationship” refer to Nutzungen, translated as “emoluments” by Markesinis et al. (n. 24). The term is defined in ‘ 100 so as to include fruits (itself defined in ‘ 99 to include revenues) and also (as translated by Markesinis et al.) “the advantages which the use of the thing or right affords.”
34 G.S. Challies, The Doctrine of Unjustified Enrichment in the Law of the Province of Quebec (2nd ed., 1952), 63.
35 Dawson (n. 2), 106, on subsidiarity: “In terms this limitation is an adequacy test, reserving the action for cases where no adequate alternative remedy is authorized by the Code.”
36 Gagné v. Tremblay [1989] R.J.Q. 1619 (Que. Ct.).
37 As observed in H. Mazaud et al., Leçons de Droit Civil, tome II, vol. 1, F. Chabas, Les Obligations (8th ed., 1991), ‘709.
38 Civ. (1) 3.vi.1997, J.C.P. 1998.II.10102, note Viney. I am grateful to Jean-Pascal Chazal, Université Jean Monnet (Saint Etienne), for drawing this case to my attention.
39 As does G. Viney in his note, ibid.
40 Some French writers have recognised the difference between strong and weak subsidiarity: for example Chabas (n. ), 706-709.
41 For Quebec, see for example Nadeau v. Doyon [1994] R.J.Q. 2267 (Que. Ct.), citing Quebec and French doctrine. For Germany, Zimmermann and du Plessis, [1994] Restitution Law Review 22-24. For the common law, G. Virgo, ‘The Effect of Illegality on Claims for Restitution in English Law’, in: W. Swadling (ed.), The Limits of Restitutionary Claims: A Comparative Analysis (1997) 141 ff; Law Commission Consultation Paper No. 154, Illegal Transactions: The Effect of Illegality on Contracts and Trusts (1999), Part II.
42 Dawson took the view that this is not subsidiarity as such: Dawson (n. 2), 106; but that is understandable since he was using the term in the sense which in this paper is denoted by “weak subsidiarity”; see n. . See also B. Nicholas, ‘Unjust Enrichment and Subsidiarity’, in: F. Santoro Passarelli and M. Lupoi (eds.), Scintillae iuris: studi in memoria di Gino Gorla (1994) 2037 ff, 2044. Still, courts in France (Civ. 12.v.1914, S. 1918.1.41 note Naquet; Civ. (3) 29.iv.1971, G.P. 1971.2.554) and Quebec (Bédard v. Bédard Transport Co., [1960] C.S. 472) have described this as subsidiarity.
43 Willmor Discount Corp. v. Vaudreuil (City) [1994] 2 S.C.R. 210, 227. This conclusion can be expected to remain true under the Civil Code of Quebec. Because the action for reception of a thing not due was prescribed, however, the conclusion could rest on weak subsidiarity: see Section III.2.
44 Gagné v. Tremblay [1989] R.J.Q. 1619 (Que. Ct.).
45 § 993(1), last half-sentence. It is also true in German law that if the plaintiff has an enrichment claim based on a “performance,” then he may not bring any other kind of enrichment claim against that defendant. Because this principle has much wider effects, controlling which defendant the plaintiff may sue, it is explained and discussed below, Section III.1.b.i, text around n. .
46 In Quebec, the general enrichment action is subsidiary to all claims, as discussed in the next section. For Germany, see Markesinis et al. (n. 24), 768 (noting that claims against the manager may attract concurrent liability under both regimes).
47 Note however the suggestion in A.S. Burrows, ‘Free Acceptance and the Law of Restitution,’ (1988) 104 Law Quarterly Review 576 ff, 599, that if the common law allows claims based on “free acceptance,” these should not be available except where no other basis for a claim exists. The suggestion is adopted in P.B.H. Birks, ‘In Defence of Free Acceptance’, in: A. Burrows (ed.), Essays on the Law of Restitution (1991) 105 ff, 144-145. This however would probably be weak subsidiarity.
48 That is, the plaintiff must show that the contract was void or unenforceable ab initio, or has been avoided or terminated. German law: Markesinis et al. (n. 24), 45. Quebec law: Challies (n. 34), 95-96; J. Pineau, D. Burman, S. Gaudet, Théorie des Obligations (3rd ed., 1996), 305-306, 601-602. Common law: Pan Ocean Shipping Co. v. Creditcorp Ltd. [1994] 1 W.L.R. 161 164F (H.L.), per Lord Goff; Singh v. Singh (1992), 71 B.C.L.R. (2d) 336, [1993] 2 W.W.R. 59 (C.A.); 337965 B.C. Ltd. v. Tackama Forest Products Ltd. (1992), 67 B.C.L.R. (2d) 1, 91 D.L.R. (4th) 129 (C.A.), leave to appeal refused [1993] 1 S.C.R. v; Building Design 2 Ltd. v. Wascana Rehabilitation Centre, [1992] 6 W.W.R. 343 (Sask. Q.B.); Hesjedal v. Granville Estate (1993), 117 Sask. R. (2d) 111, 109 D.L.R. (4th) 353 (Q.B.); Scott v. Noble (1994), 99 B.C.L.R. (2d) 137 (C.A.); Luscar Ltd. v. Pembina Resources Ltd. (1994), 24 Alta. L.R. (3d) 305, [1995] 2 W.W.R. 153 (C.A.), at paras. 111-122, leave to appeal refused [1995] 3 S.C.R. vii; Windisman v. Toronto College Park Ltd. (1996) 28 O.R. (3d) 29, 132 D.L.R. (4th) 512 (Gen. Div.).
49 R. Zimmermann, ‘Restitution After Termination for Breach of Contract in German Law’, [1997] Restitution Law Review 13 ff, 17-18 notes that the idea that the relevant provisions in the BGB are a special kind of enrichment claim is no longer accepted by most German jurists. Recovery in French law is usually understood as based on the claim for reception of a thing not due: J. Flour and J.-L. Aubert, Droit Civil[:] Les Obligations, vol. II (6th ed.by J.-L. Aubert, 1994), 26; J. Bell, S. Boyron, and S. Whittaker, Principles of French Law (1998), 421; even if the basis is said to be theoretically different, it is conceded that this is the practical outcome: M. Malaurie, Les Restitutions en Droit Civil (1991), 35. In Quebec, the provisions on “restitution of prestations” in artt. 1699-1707 were added in the new Civil Code for just this type of situation. In the plan of the Code, they belong neither to unjust enrichment nor to contract.
50 Zimmermann, [1997] Restitution Law Review 18, apparently disagreeing with the majority view; D.P. Visser, ‘Rethinking Unjustified Enrichment: A Perspective of the Competition between Contractual and Enrichment Remedies’, [1992] Acta Juridica 203 ff, 209-210.
51 (1997), 118 Man. R. (2d) 11, [1997] 7 W.W.R. 534 (C.A.).
52 S. Smith, ‘Concurrent Liability in Contract and Unjust Enrichment’, (1999) 115 Law Quarterly Review 245 ff. See also Visser, [1992] Acta Juridica 231-236.
53 Req. 15.vi.1892, S. 1893.1.281 note Labbé, D. 1892.1.596.
54 Section IV.2.a.
55 Challies (n. 34), 30.
56 This may be contrasted with the words in art. 1494 which establish a relationship of weak subsidiarity between claims in unjustified enrichment and other claims: see Section III.2.
57 Art. 1493. Surprisingly, however, it is suggested in Pineau et al. (n. 48), 406-407, that a claim in unjustified enrichment would be available in this situation. The same suggestion is made in Pavage Rolland Fortier Inc. v. Caisse Populaire Desjardins de la Plaine [1998] R.J.Q. 1221, 1227 (S.C.), although citing French doctrine.
58 Harris v. Nugent (1996) 193 A.R. 113, 141 D.L.R. (4th) 410 (C.A.); J.E. Weaver Enterprises Ltd. v. Hardy (1998) 171 N.S.R. (2d) 30, 519 A.P.R. 30 (S.C.). See also Nicholson v. St. Denis (1975) 8 O.R. (2d) 315, 57 D.L.R. (3d) 699 (Ont. C.A.), leave to appeal to S.C.C. refused loc. cit. This case refused recovery on the unhelpful ground that there was no “special relationship” between plaintiff and defendant; but it is still often cited, and the facts are functionally those of Boudier. Other cases denying recovery, but with a slight factual twist on this basic pattern, will be mentioned below in the section on “Combinations”: Section III.1.b.iii, at note .
59 Pan Ocean Shipping Co. v. Creditcorp Ltd. [1994] 1 W.L.R. 161, 166EF (H.L.).
60 J.P. Dawson, ‘Indirect Enrichment’, in: E. von Caemmerer, S. Mentschikoff and K. Zweigert (eds.), Ius Privatum Gentium (1969) 789 ff, 805, with citations to U.S. authority; see also J.P. Dawson, ‘The Self-Serving Intermeddler’, (1974) 87 Harvard Law Review 1409 ff, 1444-1450.
61 Dawson (n. 60), 805. The special treatment of lawyers was the jumping-off point of Dawson’s important article ‘The Self-Serving Intermeddler’, (1974) 87 Harvard Law Review 1409 ff; and Dawson returned to the theme in ‘Lawyers and Involuntary Clients: Attorney Fees from Funds’, (1974) 87 Harvard Law Review 1597 ff and ‘Lawyers and Involuntary Clients in Public Interest Litigation’, (1975) 88 Harvard Law Review 849 ff.
62 (1993) 15 O.R. (3d) 387 (Gen. Div.).
63 Taylor (S.A.) Building Ltd. v. Von Meunchhausen (1995) 165 N.B.R. (2d) 219, 424 A.P.R. 219 (C.A.).
64 This is supported by the contributions to this volume of Danie Visser and Niall Whitty, both of whom note that the “at the expense of” requirement permits the imposition of additional policy-driven constraints upon the claim.
65 Zimmermann and du Plessis, [1994] Restitution Law Review 25; Markesinis et al. (n. 24), 720. The translation “performance” is that of Markesinis et al.; Zimmermann and du Plessis translate Leistung as “transfer.”
66 Markesinis et al. (n. 24), 719.
67 Zimmermann and du Plessis, [1994] Restitution Law Review 37, discussing possible exceptions at 37-38; Markesinis et al. (n. 24), 723.
68 The German rule operates to exclude the claim even if the plaintiff’s contract with the third party was void, because the concept of performance does not depend on the existence of an underlying contract.
69 This point is taken in Dawson (n. 60), 1446-1447.
70 See however Turf Masters Landscaping Ltd. v. TAG Developments Ltd. (1995) 143 N.S.R. (2d) 275, 411 A.P.R. 275 (C.A.), leave to appeal refused (1996) 151 N.S.R. (2d) 240, 440 A.P.R. 240 (S.C.C.). This was actually a “combination” case as discussed in the next section, in which the plaintiff and the defendant both had contracts with the same third party (but not with each other); but the court’s denial of the claim was based on the non-enrichment of the defendant.
71 Above, note and text.
72 It seems just possible that a plaintiff might, by mistake, perform the prestation owing to the defendant under the defendant’s contract with the third party. Assume that the third party was contractually bound to shovel the snow from the defendant’s driveway, and the plaintiff, meaning to shovel his own driveway, cleared the defendant’s. If the defendant is still liable to pay the third party, then presumably there can be no claim against the defendant, but rather the plaintiff could succeed against the third party whose contract the plaintiff performed. Alternatively the plaintiff’s actions might have frustrated the contract between the defendant and the third party, leaving the way clear (so to speak) for an action against the defendant. Cf. Markesinis et al. (n. 24), 731-732.
73 As noted in Simon Whittaker’s contribution, however, in the French legal tradition obligations are viewed as personal to the parties; while the plaintiff can perform the prestation owing under another’s obligation, it is not clear that the plaintiff can perform another’s obligation as such. Nonetheless, we may note that in discussing the position under the Civil Code of Lower Canada (and in French law), Challies (n. 34), 104-112, was of the view that no claim could be made in such a case.
74 Friesen (P.H.) Ltd. v. Cypress Colony Farms Ltd. (1993) 87 Man. R. (2d) 250 (Q.B.) suggests that the defendant’s contract with a third party is not a bar.
75 Dawson (n. 2), 125. See also Dawson (n. 60), 802-803; Dawson (n. 60), 1450-1457.
76 In order to deny a claim in unjustified enrichment where the statutory protection was unavailable, it would also have to be a strong subsidiarity principle.
77 Pan Ocean Shipping Co. v. Creditcorp Ltd. [1994] 1 W.L.R. 161 (H.L.); Turf Masters Landscaping Ltd. v. TAG Developments Ltd. (1995) 143 N.S.R. (2d) 275, 411 A.P.R. 275 (C.A.), leave to appeal refused (1996) 151 N.S.R. (2d) 240, 440 A.P.R. 240 (S.C.C.); Hussey Seating Co. (Canada) Ltd. v. Ottawa (City) (1997) 145 D.L.R. (4th) 493 (Gen. Div.) aff’d (1998) 41 OR (3d) 254 (C.A.); Toronto-Dominion Bank v. Carotenuto (1997) 154 D.L.R. (4th) 627 (B.C.C.A); Elmford Construction Co. v. South Winston Properties Inc. (1999) 45 O.R. (3d) 588 (S.C.J.). Writing particularly of the three-party building contract cases in U.S. law, Dawson (n. 60), 1447 said that “The decisions, old and new, are lined up in an unbroken phalanx against restitution recovery.”
78 In Pan Ocean Shipping Co. v. Creditcorp Ltd. [1994] 1 W.L.R. 161 (H.L.), Lord Goff was of the view that it was the fact that the plaintiff had conferred the benefit under a contractual obligation to do so; interestingly, in his comment on the case, Professor Burrows seems to prefer the view that it was the defendant’s contract which was decisive: [1994] Restitution Law Review 52 ff, 55.
79 Cie Immobilière Viger Ltée v. Laureat Giguère Inc. [1977] 2 S.C.R. 67, 84. The words of art. 1494, Civil Code of Quebec which enshrine the weak subsidiarity principle seem designed to codify this ruling: enrichment or impoverishment is justified where it results “from the failure of the person impoverished to exercise a right of which he may avail himself or could have availed himself against the person enriched” [emphasis added]. This interpretation finds favour in J.-L. Baudouin, Les Obligations (5th ed., 1998), 442.
80 Note however that it was held in Willmor Discount Corp. v. Vaudreuil (City) [1994] 2 S.C.R. 210 that a claim for reception of a thing not due is not subsidiary to a claim based on fault, and there is no reason to think this is not still true under the Civil Code of Quebec, where reception of a thing not due is codified separately from the general unjustified enrichment claim, and without any language giving rise to subsidiarity.
81 R.B. Grantham and C.E.F. Rickett, ‘Restitution, Property and Ignorance C A Reply to Mr. Swadling,’ [1996] Lloyds Maritime and Commercial Law Quarterly 463 ff, 465; see also J.H. Baker, ‘The History of Quasi-Contract in English Law’, in: W.R. Cornish et al. (eds.), Restitution [:] Past, Present and Future (1998), 37 ff, 52.
82 See Pineau et al. (n. 48), 404 (my translation): “… the action de in rem verso is not available where the plaintiff has an action arising from a contract, from extracontractual fault, from management of the business of another, or from payment of a thing not due.”
83 Markesinis et al. (n. 24), 768.
84 The words of art. 1494 of the Civil Code of Quebec seem clear on this point; the claim in unjustified enrichment is denied if the situation arises from the failure of the plaintiff to exercise a right “of which he may avail himself or could have availed himself”; this is in line with what the law was understood to be under the Civil Code of Lower Canada;Cie Immobilière Viger Ltée v. Laureat Giguère Inc. [1977] 2 S.C.R. 67; Loungnarath v. Centre Hospitalier des Laurentides [1996] R.J.Q. 2498, per Chamberland J. Common law authority on the point goes the same way: Luscar Ltd. v. Pembina Resources Ltd. (1994) 24 Alta. L.R. (3d) 305, [1995] 2 W.W.R. 153 (C.A.), at paras. 117, 120, leave to appeal refused [1995] 3 S.C.R. vii. See also E. Schrage, “Restitution in the New Dutch Civil Code” [1994] R.L.R. 208 at 220-221.
85 Art. 1494, cited in the previous note, arguably does exactly this.
86 Nicholas (n. 42), 2039-40.
87 Rights are affected in some sense when a claim in unjustified enrichment is barred even if another claim is available. Moreover, even weak subsdiarity can prevent a claim in unjustified enrichment when the other claim is prescribed (above, text at n. 84), which obviously has a substantial effect on the plaintiff’s legal position.
88 Nicholas (n. 42), 2041-43.
89 Moses v. Macferlan (1760) 2 Burr. 1005, 97 E.R. 676 (K.B.). See also Baker (n. 81), 48-49; M. Macnair, ‘The Conceptual Basis of Trusts in the Later 17th and Early 18th Centuries’, in: R. Helmholz and R. Zimmermann (eds.), Itinera Fiduciae (1998) 207 ff, 218.
90 J.E.C. Brierley and R.A. Macdonald (eds.), Quebec Civil Law (1993), 464, suggest that this was the most important extra-codal development under the Civil Code of Lower Canada. See also Baudouin (n. 79), 441 (my translation): “The action de in rem verso exists to remedy unforeseen situations and not to replace existing dispositions or agreements.”
91 B. Dickson, ‘The Law of Restitution in the Federal Republic of Germany’, (1987) 36 International and Comparative Law Quarterly 751 ff, 770-771. See also Zweigert and Kötz (n. 27), 561-562.
92 See Zimmermann and du Plessis, [1994] Restitution Law Review 24; Dawson (n. 60), 796-797.
93 Upon the institution of the Judicature Act system, consolidating the two legal regimes into a single court, it was enacted that in the case of any conflict between law and Equity, Equity should prevail; and this disposition remains operative in every jurisdiction which possesses the Judicature Act system. To the modern lawyer this might seem to indicate that Equity belongs to a higher legal order. Viewing the matter in a historical light, as captured by the maxim about supplementing without contradicting, Maitland took the view that this provision is “practically without effect”; apparent conflicts resolve themselves into cases of supplementation. See F.H. Maitland, Equity[:] A Course of Lectures, rev. J. Brunyate (1936), 16-19. By contrast, if one takes the other perspective, that any alteration of the final result amounts to contradiction, then Equity is constantly contradicting the law: see W.N. Hohfeld, ‘The Relations Between Equity and Law’, (1913) 11 Michigan Law Review 537 ff, 543-544.
94 Maitland famously gave up on any positive definition: Maitland (n. 93), 1: “… we are driven to say that Equity now is that body of rules administered by our English courts of justice which, were it not for the operation of the Judicature Acts, would be administered only by those courts which would be known as Courts of Equity. This, you may well say, is but a poor thing to call a definition.”
95 Zweigert and Kötz (n. 27), 538: “The layman can make nothing of the expressions [‘unjustified enrichment,’ “enrichissement injustifié,’ ‘ungerechtfertigte Bereicherung’], and can hardly be blamed for it.”
96 Zimmermann and du Plessis, [1994] Restitution Law Review 24, on the years after the adoption of the BGB: “But it was no easy task to interpret these expressions in a way which did not bring about an uncontrollable extension of liability.” Dawson (n. 2), 104, on French law: “In the constant struggle to contain the actio de in rem verso, various techniques have been employed.” At 106, on subsidiarity: “In terms this limitation is an adequacy test, reserving the action for cases where no adequate alternative remedy is authorized by the Code. In certain applications this is precisely its effect. Though this limitation has been rejected by some of the writers and is not systematically applied, it has proved quite useful in keeping the modern remedy within manageable limits.” The reference to subsidiarity as an adequacy test provides another parallel to Equity. Of course, every legal liability needs its boundaries, but anyone who has studied unjustified enrichment will I think agree that containment is a constant concern, more so than in other fields. Baudouin (n. 79), 441, on subsidiarity (my translation): “If the law provides another recourse, the impoverished party must pursue it, for otherwise the action de in rem verso would take on a kind of universality which it must not have.” See also K. Barker, ‘Unjust Enrichment: Controlling the Beast’, (1995) 11 Oxford Journal of Legal Studies 457 ff.
97 See P.W. Hogg, Constitutional Law of Canada (3rd ed., 1992), 423-429.
98 The provincial legislation is still valid, because by assumption it was competent to the provincial legislature; but its effects are suspended.
99 Based on Bank of Montreal v. Hall [1990] 1 S.C.R. 121, 65 D.L.R. (4th) 361.
100 In the framework developed by P.B.H. Birks, An Introduction to the Law of Restitution (rev. ed., 1989), reasons why enrichments are unjustified fall into three categories. In most cases it is because the plaintiff’s consent to the transfer was impaired in some way. In some cases it is because the defendant’s receipt was unconscientious, and in some others it is because of a reason of policy which does not depend on the position of either party to the transfer. In the other systems there is no doctrinal framework of “unjust factors,” but it is true (although it may be a matter of defence) that there can be no recovery if the plaintiff had an unimpaired desire to make the transfer: BGB ‘ 814; Civil Code of Quebec, art. 1494, closing words.
101 In Pan Ocean Shipping Co. v. Creditcorp Ltd. [1994] 1 W.L.R. 161, 164F (H.L.), Lord Goff used language which strongly suggested that the law of unjustified enrichment and the parties’ contract are on different legal orders (emphasis added): “as between shipowner and charterer, there is a contractual regime whichlegislates for the recovery of overpaid hire.”
102 (1992) 89 D.L.R. (4th) 600 (C.A.).
103 (1997) 118 Man. R. (2d) 11, [1997] 7 W.W.R. 534 (C.A.).
104 See Peel (Regional Municipality) v. Canada [1992] 3 S.C.R. 762, 98 D.L.R. (4th) 140, 160 where McLachlin J. (as she then was) seemed attracted by the German rule.
105 Dawson (n. 2), 104-105.
106 See Markesinis et al. (n. 24), 732-733.
107 See for example Rover International Ltd. v. Cannon Film Sales Ltd. (No. 3) [1989] 1 W.L.R. 912 (C.A.).
108 The arrêt Boudier, Req. 15.vi.1892, S. 1893.1.281 note Labbé, D. 1892.1.596.
109 This was opposed to a legal obstacle, such as prescription or inability to make out the elements of the other claim. See P. Drakidis, ‘La ‘subsidiarité’, caractère spécifique et international de l’action d’enrichissement sans cause’, (1961) 59 Revue trimestrielle de droit civil 577 ff, 586-7, 613. For recovery in Quebec in the same situation, see Challies (n. 34), 139. Italian law followed the French law in this regard: Zweigert and Kötz (n. 27), 550; Nicholas (n. 42), at 2038-39. Nicholas notes that Italian writers distinguish between an “abstract” and a “concrete” understanding of subsidiarity; the “concrete” understanding allows the claim in unjustified enrichment where the other claim is useless due to insolvency or prescription.
110 Some commentators and judges, however, appear to take the view that the distinction between factual and legal obstacles remains relevant: Pineau et al. (n. 48), 406-407; Pavage Rolland Fortier Inc. v. Caisse Populaire Desjardins de la Plaine [1998] R.J.Q. 1221, 1227 (S.C.), citing French doctrine.
111 [1998] 4 All E.R. 513, [1998] 3 W.L.R. 1095 (H.L.).
112 The argument was built on points made in P.B.H. Birks, ‘No Consideration: Restitution After Void Contracts’, (1993) 23 University of Western Australia Law Review 195 ff, 230 n. 137.
113 Guinness Mahon & Co Ltd. v. Kensington and Chelsea Royal L.B.C. [1998] Q.B. 215 (C.A.).
114 See Lord Goff at [1998] 3 W.L.R. 1126-27; Lord Hope at 1153H. Birks himself has now made this point: P.B.H. Birks, ‘Restitution at the End of an Epoch’, (1999) 28 University of Western Australia Law Review 13 ff, 37-39; see also L.D. Smith, ‘Restitution for Mistake of Law’ [1999] Restitution Law Review 148 ff, 157.
115 See n. 112.
116 Grantham and Rickett, [1996] Lloyds Maritime and Commercial Law Quarterly 465.
117 Baker (n. 81), 52.
118 Portman Building Society v. Hamlyn Taylor Neck [1998] 4 All E.R. 202 (C.A.).
119 For the common law, see Smith (n. 6); for German law, K. Zülch, ‘Lipkin Gorman in German Law’, in: W. Swadling (ed.), The Limits of Restitutionary Claims: A Comparative Analysis (1997) 106 ff, 116-119. In Quebec the same result must follow from the requirement (art. 1493) that a claim will not lie if either the plaintiff’s impoverishment or the defendant’s enrichment is justified; here the defendant’s enrichment would be justified by the rule of law giving him ownership.
120 Nicholas (n. 42), 2043-4.
121 Nicholas (n. 42), 2040-1. Challies (n. 34), 125 was not enthusiastic about this argument as a justification for general subsidiarity, but it may still function as an explanation for the current law.
122 Willmor Discount Corp. v. Vaudreuil (City) [1994] 2 S.C.R. 210.
123 In French law, the actio de in rem verso developed extra-codally (and still is so), and is generally subsidiary. On the other hand, the action for reception of a thing not due was always in the Code, and it is not subsidiary: Chabas (n. 37), ‘653; J. Bell, S. Boyron, and S. Whittaker (n. 49), 410, 416-417. In Italy, the actio de in rem verso appeared first as an extra-codal development, and when it was codified, it kept its subsidiary character, just as in Quebec. By contrast, German law never knew unjustified enrichment as an extra-codal development; there has been a general action from the time of codification. Similarly, in the Netherlands, there was no general extra-codal enrichment claim under the old code, and the new code, in adding one, did not make it subisidiary: E. Schrage, ‘Restitution in the New Dutch Civil Code’, [1994] Restitution Law Review 208 ff, 216, 220. See also D.H. van Zyl, ‘The General Enrichment Action is Alive and Well’, [1992] Acta Juridica 115 ff, 128-130.
124 In Willmor Discount Corp. v. Vaudreuil (City) [1994] 2 S.C.R. 210, 227, Gonthier J. referred to the the action for the reception of a thing not due as “the only action for unjust enrichment” available in that case.
125 The travaux préparatoires for the new Code show an attempt to codify the law of unjustified enrichment as it was understood; they do not reveal any critical examination of the general subsidiarity of the general enrichment claim. See Québec (Ministère de la Justice), Commentaires du ministre de la Justice: le Code civil du Québec (1993), 917 (my translation): “This article [scil. art. 1493] will therefore give legislative effect to these doctrinal and jurisprudential developments in unjustified enrichment.” Challies (n. 34) was of the view that the actio de in rem verso was not generally subsidiary: he states this explicitly at 143, and the section of his book which addresses the matter is entitled not “Subsidiarity” but “No Indirect Contravention of Imperative Rules of Law.” The Nahum Gelber Law Library at the Faculty of Law, McGill University holds the unpublished manuscript of Challies’ third edition, dated 1970; this shows that he planned to change this title to “Absence of Other Possible Action – or – No Indirect Contravention of Imperative Rules of Law.” No doubt this was due to the accumulation of cases accepting subsidiarity in the intervening years.
© 2000 L. Smith. This HTML edition © 2000 University of Oxford.
This entry was posted in 2000, 6, Articles, Lionel Smith on 27 July 2017 by Steve Allen.
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