Defences in Unjust Enrichment

Andrew Dyson, James Goudkamp, Frederick Wilmot-Smith, Andrew Dyson, James Goudkamp, Frederick Wilmot-Smith

• Publisher: Hart Publishing
• Year: 2016
• ISBN:
  9781782256359
• Edition: 1
• Topic: Law
• Subtopic: Contract Law
• Index: Law

This book is the second in a series of essay collections on defences in private law. It addresses defences to liability arising in unjust enrichment. The essays are written from a range of perspectives and methodologies. Some are doctrinal, others are theoretical, and several offer comparative insights. The most important defence in this area of the law, change of position, is addressed in detail, but many other defences are treated too, as well as the interrelations between these defences within the law of unjust enrichment. The essays offer novel claims and ways of looking at problems in this challenging area of legal study.

1

Defences in Unjust Enrichment: Questions and Themes

ANDREW DYSON, JAMES GOUDKAMP AND FREDERICK WILMOT-SMITH

1. INTRODUCTION

THIS BOOK IS the second in a series of four that is concerned with defences to liability arising in private law. We felt, and still feel, that the topic has not received the attention that it deserves.¹ We are not alone in holding this view.² By contrast, defences have dominated the research agendas of many scholars of the criminal law.³ The asymmetry in attention to defences in these different fields is striking in part because of the apparent parallels between the two domains. For instance, the distinction in private law between causes of action and defences arguably mirrors that between offences and defences in the criminal law.⁴

Our first book examined defences to tort claims.⁵ The present volume deals with defences to claims in unjust enrichment. The next two books will concern defences to contractual claims and claims in equity respectively. Part of the reason why we undertook to produce a series of books was that we believe there is merit in thinking about private law defences as a whole.⁶ The workshop at which the chapters published here were originally presented, and the chapters themselves, confirms that that belief was, and remains, justified. The same questions that had arisen in our exploration of tort law defences frequently recurred in the unjust enrichment defences workshop. In this introductory chapter, we review several of these questions. We also set out how our contributors seek to answer them.

2. TWO QUESTIONS ABOUT DEFENCES

In this section we discuss two important controversies about defences: the first is what a defence actually is; the second is the justification for a legal system recognising defences. We discuss the first of these questions by reference to the distinction between denials and defences.

2.1.Distinguishing Denials and Defences

2.1.1.Preliminaries

At the first workshop, on tort law defences, it was clear that there was no consensus as to the meaning of the term ‘defence’. Indeed, one of the chapters in the collection on tort defences concerned itself exclusively with the definition of the concept.⁷ It reveals that scholars understand the term in numerous different ways and that disagreements between scholars in this regard are vigorous and multi-faceted, with several orthogonal debates breaking out. There seemed to be fewer disagreements at the unjust enrichment workshop on this particular point. However, this harmony may be illusory: when the question was approached in terms of denials and defences (ie, how are defences distinct from denials?), alliances seemed to be much shakier.

In our chapter in the first book on tort law defences, we considered the distinction between denials and defences at some length.⁸ The distinction aims to separate two kinds of response that a defendant might make to a claim: a denial is an assertion that the cause of action is incomplete;⁹ a defence accepts that the cause of action is complete, but argues that liability should be reduced or eliminated on account of some other consideration (although some scholars consider rules that merely reduce liability not to be defences but a tertium quid).¹⁰ Difficult issues regarding this distinction that we identified included: whether there is indeed a conceptual distinction between denials and defences; and, if there is a distinction, the identification of the different characteristics of denials and defences.

Several contributors endorse the distinction between denials and defences in this volume.¹¹ For instance, Klimchuk says:¹²

We can ask, first, whether change of position works to deny that an element of the cause of action in unjust enrichment has been made out, or whether instead it serves to reduce the defendant’s liability notwithstanding that the elements of the cause of action have been made out.

However, although the distinction is evidently seen to be of vital import by contributors who recognise it—for example, both Helen Scott and Dennis Klimchuk dedicate substantial parts of their chapters to the proper classification of two doctrinal rules by reference to it—our contributors seem as a whole to assume the distinction is unproblematic. In our earlier work, we suggested some reasons to doubt whether the distinction is indeed trouble-free.¹³ We want to highlight three problems with which scholars who endorse the distinction must, in our view, grapple: first, we discuss some disagreement about the nature of the distinction between denials and defences; next, we ask whether the law of unjust enrichment recognises the distinction; and, finally, we consider whether the distinction is exhaustive of the rules that comprise the law of unjust enrichment.

2.1.2.What Kind of Distinction is it?

There appeared to be some disagreement amongst our contributors about the nature of the distinction between denials and defences. In her contribution, Elise Bant argues that understanding the defence of change of position ‘as an aspect of the general enrichment enquiry’ (ie, as part of the cause of action) would be ‘contrary to the vast preponderance of authority that conceives of and treats the defence as having a role independent of the elements of the primary claim’.¹⁴ Although Bant is here concerned with the possible changes to the substantive rules of change of position which might have to be made if change of position were thought of as a denial, the passage suggests one way in which the distinction between denials and defences can be understood: as one that the law itself draws. On this analysis, in other words, the boundary of the distinction between denials and defences is to be settled by legal authorities.

Compare Bant’s analysis with that offered by Helen Scott. Scott writes that ‘the distinction between actions and defences, and more specifically denials and defences, turns on substantive arguments about the definition of torts’.¹⁵ Although Scott is talking about the law of torts here, the context makes it clear that her claim in this regard is not confined to that branch of private law. Scott adds that the task of deciding whether some doctrine is ‘extrinsic to the claimant’s action’ is ‘an exercise informed by doctrinal and moral arguments specific to the unjust enrichment context, not instrumental arguments of relatively general application’.¹⁶ All this suggests that the classification of a doctrine as a defence or a denial is not a mere function of authority; instead, it depends in part on normative arguments extrinsic to the law (even if these arguments must, for whatever reason, be local ‘to the unjust enrichment context’). Scott does not, we take it, mean to suggest that the question is whether there are good normative reasons to employ the distinction—we are here concerned with definition, not justification.¹⁷ Instead, she suggests that normative arguments cannot be avoided in the description of the distinction between denials and defences.¹⁸

2.1.3.Does the Law of Unjust Enrichment Recognise the Distinction?

The next problem concerns whether the distinction between denials and defences, howsoever understood, is recognised in the law of unjust enrichment. It is salutary here to recall certain statements defining the cause of action in unjust enrichment. In a widely endorsed passage, Lightman J stated:¹⁹

It is now authoritatively established that there are four essential ingredients to a claim in restitution:

i)a benefit must have been gained by the defendant;

ii)the benefit must have been obtained at the claimant’s expense;

iii)it must be legally unjust, that is to say there must exist a factor (referred to as an unjust factor) rendering it unjust, for the defendant to retain the benefit;

iv)there must be no defence available to extinguish or reduce the defendant’s liability to make restitution.

Taken literally, this would show that the law of unjust enrichment does not distinguish denials and defences. The fourth ingredient that Lightman J mentions brings defences within his definition of an action in unjust enrichment in negative form.²⁰ The absence of defences is, in other words, one of the elements of the action.²¹

Attempts to fold defences into the cause of action have been made not only in relation to definitions of a cause of action in unjust enrichment but also in connection with individual ‘defences’. Consider, for example, the fact that one prominent way of understanding the change of position ‘defence’ is to see it as concerned with ‘disenrichment’ and hence with the enrichment element of the action. Peter Birks argued that this ‘defence’ ‘[attacks the element of] “enrichment at the expense of the claimant.”’²² So conceived, the change of position ‘defence’ is not, it would seem, ‘external’ to the cause of action. Given the prominence of the change of position ‘defence’, this logic might lead one to think that the law of unjust enrichment does not recognise any defences. Perhaps some legal systems have reached that position already. For instance, Helen Scott, in her contribution in this volume, suggests that ‘South African law may embody that mythical system … in which all liability rules have been assimilated to the elements of the action, rendering defences (or at least defences specific to the law of enrichment) superfluous’.²³

These remarks raise many important questions. Is the law of unjust enrichment best understood without considering defences? Or is there some reason why the concept of defences—howsoever understood—is important to our understanding of the terrain? More generally, should such an approach—whereby defences are folded into the cause of action—be applied to the legal system as a whole? Or is there something wrong with such a system? We will return to this last question later, when we consider the point of formulating legal rules as defences.²⁴ For now, however, we want to highlight another reason to examine the law of unjust enrichment through the prism of this distinction between defen...

Table of contents

• Cover
• Title Page
• Foreword
• Contributors
• Table of Cases
• Table of Legislation
• 1. Defences in Unjust Enrichment: Questions and Themes
• 2. Defences and the Disunity of Unjust Enrichment
• 3. Defence, Denial or Cause of Action? ‘Enrichment Owed’ and the Absence of a Legal Ground
• 4. What Kind of Defence is Change of Position?
• 5. The Unity of Pre-receipt and Post-receipt Detriment
• 6. Proprietary Restitution and Change of Position
• 7. Change of Position: Outstanding Issues
• 8. The Defence of Illegality in Unjust Enrichment
• 9. Minority and Unjust Enrichment Defences
• 10. Defences to Restitution Between Victims of a Common Fraud
• 11. Bona Fide Purchase as a Defence in Unjust Enrichment
• 12. Counterfactual Arguments Against Woolwich Liability
• 13. Theory and Practice
• Index of Authors
• Index
• Copyright Page