Enrichment at the Claimant's Expense

Attribution Rules in Unjust Enrichment

Eli Ball

• Publisher: Hart Publishing
• Year: 2016
• Print ISBN:
  9781509928880
• Edition: 1
• eBook ISBN:
  9781782258407
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

This book presents an account of attribution in unjust enrichment. Attribution refers to how and when two parties – a claimant and a defendant – are relevantly connected to each other for unjust enrichment purposes. It is reflected in the familiar expression that a defendant be 'enriched at the claimant's expense'. This book presents a structured account of attribution, consisting of two requirements: first, the identification of an enrichment to the defendant and a loss to the claimant; and, secondly, the identification of a connection between that enrichment and that loss. These two requirements must be kept separate from other considerations often subsumed within the expression 'enrichment at the claimant's expense' which in truth have nothing to do with attribution, and which instead qualify unjust enrichment liability for reasons that should be analysed in their own terms. The structure of attribution so presented fits a normative account of unjust enrichment based upon each party's exchange capacities. A defendant is enriched when he receives something that he has not paid for under prevailing market conditions, while a claimant suffers a loss when he loses the opportunity to charge for something under the same conditions. A counterfactual test – asking whether enrichment and loss arise 'but for' each other – provides the best generalisation for testing whether enrichment and loss are connected, thereby satisfying the requirements of attribution in unjust enrichment.

Part I

Defining Enrichment and Loss

It is the essence of unjust enrichment that some connection should exist between two parties. Were matters otherwise, a defendant could be liable to make restitution to any person who simply identified the fact that the defendant had been enriched in circumstances that were unjust.¹ Before we can understand that connection, however, we must first understand what it is that is being connected. That is the aim of this Part: to explain ‘enrichment’ and ‘loss’ as the two sides of unjust enrichment requiring connection and, moreover, to situate them within a single normative framework based upon the ‘exchange capacity’. The exchange capacity is the freedom to engage in systems of exchange, and is derived from wider considerations of free will and self-determination. It is the exchange capacity that brings substance to the scope of unjust enrichment, and uniformity to the concepts of enrichment and loss, by situating analysis of the subject within the real-world setting of value and exchange systems.

¹Chase Manhattan NA v Israel-British Bank (London) Ltd [1981] Ch 105 (Ch) 125 (Goulding J).

1

The Exchange Capacity

Unjust enrichment has been described by Professor Burrows as resting upon a disruption to each of two parties’ positions requiring correction.¹ This is a neat conceptual summary, but it lacks explanatory force if we do not first understand the meaning of ‘position’ in this context. Human beings are multifaceted, and a given legal system may be concerned with any one of several aspects of their condition, including the physical, emotional, psychological, cultural, religious, intellectual, and so forth. If all of these were relevant to unjust enrichment, then it could bite in many areas where most people would agree it should not. The good vibes of a nightclub, the cultural enlightenment of a museum visit, and the affectionate embrace of a friendly animal at a zoo may each be considered ‘enriching’ in a colloquial sense, but no one would say that they are within the scope of unjust enrichment. They are not the kind of enrichments that the law is concerned with. Similarly, if I happen to enjoy a good (albeit inappropriate) laugh at a man clumsily falling over in the street, then he has no claim in unjust enrichment against me, even though I have gained a beneficial experience from his misfortune.

The challenge is to understand why these things are so, and to understand where (if at all) such extraneous matters fit within an account of the law.² To understand the meaning and scope of ‘enrichment’ and ‘loss’ as they appear in the decided cases, we must first equip ourselves with a theoretical definition of what interests are relevantly within the law of unjust enrichment, and explain why they are so.

That is the aim of this chapter: to explain, from a theoretical standpoint, the interest that engages unjust enrichment. According to this book, the solution lies in the ‘exchange capacity’; that is, the capacity we each have to participate in systems for exchanging things that are capable of being exchanged. The exchange capacity is, in turn, one aspect of a wider ‘free will’ that underlies the internal structure of private law generally. Furthermore, and looking past that internal structure, the exchange capacity directs attention to instrumental considerations that define the ambit of unjust enrichment.³ So understood, the exchange capacity explains both the formal structure of unjust enrichment and its substantive scope.

(A)Corrective Justice

In Kingstreet Investments Ltd v New Brunswick (Finance) the Supreme Court of Canada observed:⁴

Restitution is a tool of corrective justice. When a transfer of value between two parties is normatively defective, restitution functions to correct that transfer by restoring parties to their pre-transfer positions.

Corrective justice, so framed, is traceable to the work of Aristotle.⁵ In time, it has come to provide a normative account of the private law of obligations, including unjust enrichment. But corrective justice, in itself, cannot provide a complete account of the subject. It only explains why unjust enrichment bites in situations that are within its scope. It does not explain what that scope is in the first place, nor does it purport to do so.

(1)Corrective Justice and Unjust Enrichment

In Nicomachean Ethics, Aristotle advanced a theory of corrective justice that immediately seems to provide a blueprint for unjust enrichment:⁶

[W]hen something is subtracted from one of two equals and added to the other, the other is in excess by these two; since if what was taken from the one had not been added to the other, the latter would have been in excess by one only. It therefore exceeds the intermediate by one, and the intermediate exceeds by one that from which something was taken. By this, then, we shall recognize both what we must subtract from that which has more, and what we must add to that which has less; we must add to the latter that by which the intermediate exceeds it, and subtract from the greatest that by which it exceeds the intermediate. … Therefore the just is intermediate between a sort of gain and a sort of loss, namely, those which are involuntary; it consists in having an equal amount before and after the transaction.

This theory is a tidy one of essentially arithmetical equality. As Professor Weinrib observes, however, it does not explain ‘what the equality is an equality of’, and so leaves corrective justice ‘opaque to the extent that the equality that lies at its heart is unexplained’.⁷ In The Idea of Private Law, Weinrib sought to provide the missing explanation by situating corrective justice theory within Kant’s philosophy of right. The equality of corrective justice, according to Weinrib, is ‘the equality of free wills in their impingements on one another’.⁸ Accordingly, the bilateral equality of corrective justice is of a normative character; a reflection, according to Weinrib, of the normativity extrinsic to all self-determining activity within Kant’s philosophy of right.⁹ Corrective justice is therefore about normative gains and losses:¹⁰

This equality is not itself factual: … it does not refer to an equality in the amount or condition of the parties’ holdings. Rather, equality is a formal representation of the norm that ought to obtain between doer and sufferer. Action that conforms to this norm, whatever it is, maintains the equality between the parties, so that no complaint is justified. Action that breaches this norm produces a gain to the injurer and a loss to the person injured. Then the court … restores the parties to the equality that would have prevailed had the norm been observed. The normative nature of the equality indicates that the variations from that equality are also normative.

Weinrib explained unjust enrichment in these terms.¹¹ As Professor Lionel Smith later observed, however, this explanation jars with corrective justice insofar as it presupposes some form of wrongdoing.¹² Private law liability, according to Weinrib, requires the violation of a norm of equality that exists between claimant and defendant; the correlativity of normative gains and losses justifying legal intervention is founded upon the violation of a duty.¹³ This sounds like a requirement of wrongdoing. It is now widely accepted, however, that unjust enrichment does not depend upon wrongdoing. Weinrib’s account seems to conflict with this view. The problem therefore arises that unjust enrichment appears oddly beyond the scope of Weinrib’s theory of corrective justice, despite it seemingly lying at the very base of Aristotelian corrective justice.¹⁴

The solution to this problem, according to Smith, lies in an elucidation of Kant’s theory of right as not requiring wrongdoing:¹⁵

We still need to get from material to normative gains and losses to have liability under corrective justice. However, it appears, to put it crudely, that less normative work is required. Less is required in exactly this sense: when a single transaction, necessarily some kind of transfer, gives rise to both a material gain on the part of the defendant and a material loss on the part of the plaintiff, it is not necessary to find that the defendant did anything wrong to characterize that gain and loss as normative. It is enough to find that the plaintiff did not fully consent to the transfer. It may also be enough to find that the defendant’s conduct was in some way unconscientious, even if it does not rise to the level of wrongdoing.

On this view, the normative gains and losses in unjust enrichment claims are not the product of wrongdoing. Instead, they represent the violation of a norm of equality based on the parties’ wills. This view appears to have been subsequently adopted by Weinrib and expressed in his own terms.¹⁶

Mr Doyle, however, has argued that even this strict liability account of unjust enrichment does not work because it is inconsistent with Weinrib’s own theory of corrective justice.¹⁷ First, he alleges that the strict liability account treats the claimant’s normative loss as arising in abstract isolation and so without the bilateral quality vis-à-vis the defendant’s enrichment necessary to explain unjust enrichment.¹⁸ Secondly, he argues that the strict liability account fails to treat the defendant as a Kantian self-determining agent in cases where a defendant does not know (and does not take the risk) that a benefit is being conferred non-gratuitously.¹⁹ As he explains:²⁰

Kantian responsibility is premised upon free choice as the condition that implicates the defendant’s autonomy, rendering the imposition of liability consistent with his free will. If the defendant is oblivious to the non-gratuitous nature of the transfer, however, his acceptance of the enrichment does not constitute any choice at all because the possibility of returning the benefit to the plaintiff simply does not arise.

There are two problems with these arguments. First, they overlook the fact that a defendant’s free will is accommodated elsewhere within the scheme of unjust enrichment. As we shall see later,²¹ the defence of change of position is also supported by considerations of corrective justice. Secondly, Doyle’s argument is compelling only if Weinribean corrective justice is viewed in abstract isolation; that is, without regard to the necessity of a particular real-world relationship between two parties. For example, Doyle relies upon the example raised by Professor Stephen Smith of someone dropping a bag of money down a deep hole where he cannot retrieve it: he was entitled to the money, but that entitlement was not violated when he dropped it, and so he suffered no normative loss.²² The suggestion, however, is that on a Weinribean account of corrective justice, there is a normative loss. That is incorrect: as Lionel Smith makes clear,²³ the normative loss is premised upon the existence of a ‘single transaction’. Precisely what that ‘single transaction’ is requires unpacking, and it is the aim of this chapter to do precisely that. But at least two points follow from the recognition of its necessity at this stage. First, neither the normative loss nor the normative gain arises in abstract. Secondly, the manner in which the defendant is treated as a Kantian self-determining agent depends upon how that real-world transaction is understood. As Weinrib has explained, the point is that defendant’s pa...

Table of contents

• Cover
• Dedication
• Title Page
• Foreword by Justice James Edelman
• Acknowledgements
• Contents
• List of Abbreviations
• Table of Cases
• Table of Legislation
• Introduction
• Part I Defining Enrichment and Loss
• Part II Connecting Enrichment and Loss
• Part III Qualifying Liability
• Conclusion
• Bibliography
• Index
• Copyright Page