Abstract
The academic theory of unjust enrichment, hypersensitive to charges that it represents ‘palm-tree justice’, aspires to a high degree of rigour and conceptual unity. The judiciary, while highly receptive to that theory, are nonetheless subject to the demand to do substantial justice in individual cases. This article reviews that tension in contemporary theory and case law. Firstly, it reviews the failure, to date, of theories seeking to justify modern unjust enrichment theory. Next, it notes the increasing rigidity of that theory. Then it reviews recent case law, where judges have evidently allowed other considerations to guide the application of theory. Finally, the article suggests that we have reached the stage where any apparently unfair claim in unjust enrichment will be refused whether or not that unfairness can find a niche in current theory, thus effectively making the liability subject to a judicial discretion.
The theory of unjust enrichment has dominated the landscape of restitution for over half a century. In its most modern form, this theory self-consciously seeks to avoid moral or policy concerns. Where possible it defines and regulates its subject matter by reference to apparently neutral principle, deliberately avoiding reference to the justice or practicality of the results. The judiciary has shown itself highly receptive to this theory, and some version of unjust enrichment theory is now the orthodox approach in all common law jurisdictions. However, when judges look at individual cases they cannot but notice features specific to those cases, particularly as to what would be a fair resolution of the dispute, or as to whether there are any wider implications to a resolution in one direction rather than another. No matter how vigorously the theorist may try to throw out questions of fairness, they always find a way back in again. The supposed neutrality of the theory is very hard to adhere to in practice. There is therefore a tension between what theory demands and what the individual dispute itself suggests to the court.
That tension is the subject of this essay. In the first section, I note the failure, to date, of theories seeking to provide a solid explanation for contemporary unjust enrichment theory: we lack any good moral, economic or political justification for the liabilities it seeks to impose. In the second, I note the increasing rigidity of the theory, and how that rigidity increasingly excludes consideration of a number of matters that might be thought important to the justice of individual claims. Turning to the case law of England and Wales, the third section notes that matters such as individual justice and past precedent have powerfully affected recent rulings in unjust enrichment cases, often in ways that render theory either misleading or simply inaccurate as a description of the law. I argue that these judicial re-assertions of the limits of theory have become more frequent and more blatant in this last decade, as judges feel the need to remind theorists of the casuistic nature of common law process. Finally, the fourth section suggests, in the light of judicial rulings to date, that no claim in unjust enrichment can succeed if the court has a firm view that that claim is an unjust one, and to that extent at least liability in unjust enrichment can be said to be subject to judicial discretion.
The justification of unjust enrichment liability
Taking it as a given that we have a law of unjust enrichment, why is that a good thing, if it is? What, in other words, is the justification of the law of unjust enrichment? That question has received relatively little attention, the theoretical focus having been almost entirely on what unjust enrichment is. Some might say that this neglect is unsurprising, because the answer is obvious. If an enrichment is unjust, how can it be denied that we should correct the injustice by removing it? But as more precise and technical meanings are given to ‘unjust enrichment’, this justification becomes less and less plain. The commonsensical argument, that unjust enrichments are obviously something the law should correct, only works if ‘unjust enrichment’ has a common-sense definition, which increasingly it does not.
‘Unjust’, as that word is used in contemporary unjust enrichment theory, is stripped of its moral and common-sense connotations. It does not suggest that the benefit was acquired unjustly in the ordinary sense—indeed, the cases where this is most obviously so (enrichment by wrong) are not regarded by most theorists as examples of unjust enrichment at all. 1 Neither does ‘unjust’ imply that justice would demand a remedy; indeed, Peter Birks suggested that ‘reversible’ enrichment would be a better indication of the reality here. 2 And the theory assumes that the appropriate remedy in cases of ‘unjust enrichment’ is to assess the degree to which the defendant was enriched and to restore that precise value—a rigid response, and not an assumption that flows from ordinary conceptions of justice. While ‘unjust enrichment’ sounds like a morally straightforward idea, modern theory in fact has something rather different in mind, something rather difficult to square with lay notions.
Modern unjust enrichment theory therefore notably lacks a moral or justificatory dimension—it is a theory of what the law is, not of why it should reasonably take that form. This leaves an obvious gap when we ask whether the law is in the shape it should be in. ‘[T]here is no sound basis for the law’s objecting to unwilled economic gain (in the absence of extraneous wrongdoing), such gains being a feature of community life’. 3 Attempts to fill this gap have not been overwhelmingly successful.
There are three main justificatory ideas. According to the corrective justice justification (as proposed by Ernest Weinrib), unjust enrichment cases involve transfers of value which the defendant voluntarily accepts but the claimant did not intend gratuitously: in such cases, justice may require return of that value. 4 According to instrumental justifications (as proposed by Hanoch Dagan), unjust enrichment provides a remedy to further the goals of promoting autonomy and increasing utility, as by ‘providing guarantees against betrayal of trust and by making free riding a losing proposition’. 5 And the proprietary justification (as suggested by Charlie Webb) proposes that the law’s protection of property goes significantly beyond what is usually referred to as ‘the law of property’, and that unjust enrichment cases are properly seen as part of that protection. 6
Each of these justifications is subject to serious criticisms, though in each instance there must be a suspicion that the criticism reflects more on unjust enrichment law than on the justification itself. The very fact that it is so hard to justify the current theoretical approach, that initially plausible justifications of it on closer examination turn out to support quite different approaches, engenders a suspicion that there is something wrong with the (descriptive) theory of ‘unjust enrichment’ itself. In more detail:
– The corrective justice approach has obvious strengths in describing the ‘free acceptance’ type of case, where the defendant appreciates that the claimant is conferring a non-gratuitous benefit, which could have been refused. But most ‘unjust enrichment’ cases are not of that type, and treating them in that framework involves a deliberate fiction. 7 Corrective justice, while it has strong points, actually justifies a rather narrower theory of unjust enrichment than the one we have, and one which clusters around ‘free acceptance’, a concept with clear moral attractions but which does not fit well with modern unjust enrichment theory. 8
– The instrumental justification has obvious strengths in areas where current precedents are unsatisfactory and the courts are seeking to do substantial justice through ‘unjust enrichment’. Yet while in the 20th century there were a number of instances of this, which the use of unjust enrichment theory has been central to correcting or at least ameliorating (such as in providing remedies against misbehaving public authorities), most of the law here is now well-settled and entirely uncontroversial. Critics therefore rightly urge that the instrumental justification is disruptive and unsettling, at least unless the law’s instrumental purposes are defined with a higher degree of rigour. 9 Current unjust enrichment theory does not encourage its users to ask whether its use furthers valuable social purposes, and asking such questions seems to run counter to the theory’s requirements—the theory says nothing about the purpose of the law and confines ‘public policy’ to as narrow an ambit as possible. Dagan’s approach does not justify unjust enrichment as it is currently employed, but rather explains how it ‘can harmlessly serve as a loose common theme of the law of restitution’, so long as appropriate justifications supplied from elsewhere. 10
– The property justification has the major advantage of fitting in with lay notions of justice: the consumer who pays for goods or services, and then does not receive them, will protest that ‘I want my money back!’. The property justification asserts that the reasons for the remedy are indeed very much to do with the money’s belonging to the consumer (rather than that it had ended up enriching the payee). However, this perspective only makes sense if we take a very distant approach to the law’s rules on ownership. In a conventional view, once the consumer has paid the money over, it is no longer theirs. The point of the property justification is that the law’s rules on ownership are not absolutes but reflect a deeper reality: the reasons why the law grants a remedy after the payment are closely related to the reasons why it would have given a remedy in the case of a simple theft from the consumer, and both sets of reasons can be seen as examples of the law’s protection of property in the money. Seen the right way up, the central case of unjust enrichment is not the mistaken payment but the theft of the claimant’s property. 11 In other words, while the property theory justifies many of the liabilities within restitution, it points away from treating them as a unit distinct from the rest of private law. 12
Particular attention has been paid to the case of the recovery of a mistaken payment, which is taken by current theory to be the paradigm for recovery in unjust enrichment. No clear justification emerges. Wilmot-Smith reviews a number of theories and concludes that no satisfactory explanation is apparent. 13 Penner argues that liability can be seen as reflecting a moral ‘duty of beneficence’, but discerns no reason why the law should enforce this duty when it refuses to enforce other, apparently equally compelling duties; he also notes that this justification puts unjust enrichment on a very different footing from other parts of private law. 14 Dagan gives detailed consideration to what the autonomy interests of payor and payee deserve in this context, leading to a nuanced proposal for the law of mistaken payments; but evidently, Dagan is addressing this as a problem in itself and not as a paradigm for any broader range of liabilities. 15
Various justifications, therefore, have a degree of plausibility, but in the final analysis point the way to theories rather different from the current orthodox theory of unjust enrichment. The ‘corrective justice’ justification points towards something considerably narrower. The ‘instrumental’ justification points to a problem-oriented law, constantly on the lookout for unresolved social issues to which the law can bring a defensible resolution. And the ‘property’ justification points towards integration with the wider law: seeking consistency across all instances of unjust enrichment would be much less important than seeking consistency in how the law treats particular types of property or particular types of transaction. And (as largely goes without saying in all three justifications) they all strongly suggest that both sides should be treated equally: if the claimant’s autonomy deserves protection from the law, so does the defendant’s. All three, in other words, are quite at odds with the unjust enrichment theory we have, which covers many benefits which cannot be said to have been freely accepted, ignores law reform issues as much as it fairly can, insists on its own theoretical unity at the expense of strong links with other legal sub-disciplines, and pays a great deal of attention to the claimant’s freedom-of-action while paying minimal attention to the defendant’s.
Increasing rigidity of unjust enrichment theory
Yet the direction of travel of modern unjust enrichment theory is clear—towards greater abstraction, not at all tied to justificatory notions, and towards ignoring questions of the defendant’s autonomy—all of which make it harder to give any meaningful account of its rationale. Its progress can readily be seen by comparing early and late editions of Goff and Jones. Early versions were happy to accept that the law might differ radically depending on the type of enrichment in issue, 16 whereas later versions are based on the pervasive assumption that the same law should apply to all. 17 Chapters on restitution for the defendant’s wrongdoing have now been omitted, as not truly based on any principle of unjust enrichment. 18 Liability as stated in the newer editions is noticeably broader, but defences are not; and some suggested defences protecting defendants who had been minding their own business (such as that the claimant was ‘officious’ 19 or conferred the benefit while ‘acting voluntarily in his own self-interest’ 20 ) appear in earlier editions but vanish in later ones. The classic judicial warning against over-broad liability—‘[l]iabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will’ 21 —was prominent in early editions 22 but is hidden away in later ones. 23
This general tendency—towards greater abstraction, as part of which issues of the defendant’s autonomy receive less and less attention—is now apparent at every level of unjust enrichment theory. It now appears to be the orthodoxy that we should not ask about the moral quality of the defendant’s behaviour, and certainly not whether it amounted to a wrong. Birks’s insistence that restitution for wrongs cannot be justified as unjust enrichment has now been largely accepted in the literature for almost two decades. Isolated instances aside, 24 it is assumed that liability in unjust enrichment is strict: if the defendant is liable, it will be regardless of whether she/he can be said to have misbehaved. Indeed, the very idea of ‘fault’ is condemned by some unjust enrichment theorists as ‘a slippery and pejorative concept’. 25 (The contrary view, widely held by tort and criminal lawyers, not to mention the general public, is not canvassed.) While there is the occasional theoretician that urges the relevance of an assessment of the defendant’s behaviour, 26 this has so far had little impact.
‘Unjust’
In defining ‘unjust’, theory has sought abstraction and emphasised the position of the claimant, reducing the entire enquiry whenever possible to a rather arid classification of the claimant’s intent in conferring the benefit, rather than asking about the defendant’s role, or what moral consideration or public policy justifies recovery. The majority of the ‘unjust factors’ are now claimant-sided factors which ask about the genuineness of claimant’s consent (mistake, duress, ignorance, incapacity etc). 27 Some writers still talk of ‘defendant-sided factors’, though they usually turn out to mean consent-based factors where (according to some but not others) we ask questions about the defendant’s conduct in determining how real the claimant’s consent was (such as undue influence). 28 The only indisputably defendant-based factors (in that their presence or absence is determined by asking principally about the defendant’s conduct and interests) are ‘free acceptance’ (a factor whose very existence has been doubted and which is at best an anomaly in current theory 29 ) and that the defendant is a public authority acting ultra vires (which is now simply a question of its status and powers 30 ).
Some writers suggest that rather than asking whether there was an unjust factor, we should enquire into the basis on which the benefit was conferred. But despite statements to the contrary, 31 it is fairly clear that no one envisages any genuine enquiry into the basis on which the defendant was involved: proof of the basis of the transaction is in practice simply a matter of enquiring into the claimant’s intent. 32
In summary, according to theory the question whether the enrichment is ‘unjust’ has become almost exclusively a question about the claimant and is only minimally about the defendant or about how the parties’ interests relate or compare to one another. The relative merits of the parties are not being examined. This, as will be examined below, 33 is a sharp contrast to the judicial approach.
‘Enrichment’
Here again, the tendency of modern unjust enrichment theory is towards both greater abstraction and declining attention to the defendant’s condition. The concept of ‘enrichment’ has in the past been made to do three distinct types of work in unjust enrichment theory:
It has been used to denote the respect in which the defendant is better off, and so to define the subject matter of the dispute.
It has also been used to assess whether establishing liability would be fair to the defendant; so it is often said that it is not fair to regard the defendant as enriched, meaning that the claim is not a fair one even if the defendant can in some sense be said to have been made better off. 34
It is also used to quantify the remedy: if it is established that the defendant was unjustly enriched, then the remedy has to consist of removing that unjust enrichment. 35
Modern unjust enrichment theory might be said to be based on blurring these three types of work, or more precisely, on insisting that all three enquiries must yield the same answer. This certainly seems to have been the line overtly taken in early editions of Goff and Jones. But those authors did not take that equivalence seriously when it led to difficulties. So (for example) cases of emergency intervention were justified as examples of ‘unjust enrichment’, even though the actual remedy granted (to award the claimants their reasonable expenses) was obviously a measure of the claimant’s loss rather than of anyone’s enrichment. 36 They were also willing to treat the statutory remedy for unjust enrichment in cases of frustrated contracts as congruent with their theory, 37 even though that statute explicitly treated the extent of the enrichment not as quantifying the remedy but merely as establishing its upper bound. 38 Reconciling the rather diverse case law with some unitary concept of ‘enrichment’ was a difficult task, and unjust enrichment theorists have developed a wide range of different ideas of what ‘enrichment’ could mean, often giving the (extremely misleading) impression that judges treated this range as a menu from which they could select, as the justice of the case seemed to require.
The tendency of modern theory is towards the objective question of whether the defendant is better off as a result of the alleged enrichment—and therefore stressing the first question at the expense of the other two.
– As to the second issue, the point can best be seen in the slow suppression—largely judge-driven—of notions of ‘subjective enrichment’, which determine the existence or value of the enrichment in large part by reference to the defendant’s attitude to the supposed enrichment. The idea of ‘subjective enrichment’ has received a lot of coverage in academic writing, 39 and to certain ears sounds like a plausible theory. If the claimant causes the strains of Mozart or Rihanna to waft across the defendant’s air-space, the defendant is benefitted by music she/he likes but not by music she/he hates. But it is hard to find anything in the case law suggesting that the defendant’s tastes are ever relevant: subjectivity of tastes will not do. More plausible is subjectivity of circumstances: how valuable a particular benefit is to me depends on my situation. In ordinary circumstances, I might place a certain value—low but not zero—on a drink of water. Were I to be stranded in the Gobi Desert with no immediate prospect of rescue, I would place a much higher value on it. That does not mean that my taste for water has changed, on the contrary. It is my objective circumstances, not my subjective tastes, that have changed. Of course, whether the defendant had any wish or use for the benefit ought to be highly relevant to whether she/he can be required to pay for its value. But current theory gives no opportunity to ask that question. 40
– As to the third issue, no reason has ever been given why the remedy in unjust enrichment cases should always consist of returning the benefit, neither a penny more nor a penny less. All we see is repetition of the same tautology, that if the remedy takes any other form then it is not a remedy for unjust enrichment. Where it is clearly established that the measure of recovery is not a measure of enrichment, then that recovery is expelled from unjust enrichment and discussed no further except as an example of erroneous classification. The question why the measure of recovery is what it is, is simply not asked. And suggestions that a claimant deserves less than this measure—because (for example) the transaction in question was an expensive fiasco the costs of which should fairly fall on the claimant—are treated as by definition erroneous, putting even further distance between common-sense morality and legal principle.
Whether the defendant is actually better off is logically a distinct question from whether the defendant owes the claimant anything for it, and asking what the remedy should consist of is a further and distinct question. Current theory quietly insinuates that these are actually the same question, and the current tendency is to focus on the first and to treat the other two as either irrelevant or necessarily to be answered in the same way. But they are not the same question at all, and all three need to be asked at some point. Purging the second and third questions from the enrichment enquiry makes no justificatory sense unless we can consider them at some other point in the exercise. But the way in which they are being purged militates against that. Modern theory leaves no natural home for the second and third issues.
It has recently been suggested that ‘enrichment’ in this context is now a term of art, 41 and so (presumably) discussion of what the word might rationally mean misses the point. But the writers who suggest this gave no very clear argument why this should be so, and the principal judicial opinions to which they referred in support of this—competing views in Sempra 42 on what the enrichment in that case was 43 —rather suggest the contrary. The competing views in Sempra all appeal to common-sense arguments on the matter. Disagreement about what common sense requires is not the same thing as rejecting common sense as a criterion, indeed it is usually the reverse. The confusion here does not seem to be intrinsic to the idea of ‘enrichment’, but rather to be the product of trying to make that concept do too much work: to determine how much better off the defendant is and to ask whether that fact entitles the claimant to a remedy and to quantify that remedy. The danger is that, now the judges are beginning to confine the concept to the first question, that the other two will be unfairly neglected.
Defences
The major innovators in unjust enrichment theory have always recognised that if the law is to recognise a broad principle of unjust enrichment, it must also provide broad defences. But for one reason or another, this has simply not happened. Early on, Goff and Jones introduced defences of ‘officious conferment of benefit’ 44 and ‘voluntary action by the claimant’ 45 , but in later editions these have disappeared. Other defences such as ‘ministerial receipt’ 46 or ‘impossibility of counter-restitution’ 47 have sprung up, but only in very limited contexts. Statute recognises unjust enrichment as a defence, so that a defendant may argue that granting a restitutionary remedy would leave the claimant unjustifiably better off—but it only does so in one very narrow (albeit well-populated) context, namely the action for recovery of certain wrongly paid taxes. 48 Theorists occasionally suggest possible new defences. 49 In other respects, the great generalisation of liability involved in unjust enrichment has passed defences by—there are a large number of defences recognised, but each is rather quirky and extremely limited in its application, and not much different from what we would have seen a century ago.
Birks saw the problem and noted the need for strong defences, 50 but in actual fact did little to promote them. There are two obvious concerns from a moral point of view. Firstly, if we are expected to pay such attention to the point that the defendant was enriched, we should equally pay attention if she/he loses that enrichment before the claimant seeks to recover it. (Whether that issue is to be addressed by a more nuanced test of enrichment or by a distinct defence of ‘disenrichment’ is a subsidiary issue. 51 ) Secondly, where the confusion that led to the conferment of the benefit can largely be said to be the fault of the claimant, it should not be obvious that the claimant can pass all of the costs involved over to the defendant—in some circumstances at least the defendant should be able to deduct expenses occasioned by claimant’s fault, and no doubt in some should have complete defence. But the existing law and theory of unjust enrichment does little of this. The most promising vehicle for these concerns is the defence of change of position, but this has been interpreted very narrowly—requiring not merely that the defendant’s position be changed, but that the defendant positively initiated such a change. 52 Relative fault can be a factor in the context of that defence, but not otherwise. 53 The generalising tendency so apparent on the claimant’s side seems to fail on the defendant’s side; so a broad principle of liability has been adopted without the broad defences that should go along with it.
Narrow range of concerns
In summary, the rapid development of unjust enrichment theory has been dominated by a narrow range of theoretical concerns, squeezing out any opportunity to ask whether individual claims are reasonable ones. Consistency is all, and justice falls by the wayside. Generality is prized above all else, and the most plausible rules are taken to be those that made sense over a wide variety of different contexts. This is pursued even to the extent of abandoning areas of law which most of the legal community were happy to regard as examples of unjust enrichment, most notably cases of restitution for wrongs—without those cases, the remainder could be stated at an even higher level of abstraction. Not all are happy with this state of affairs; scepticism is becoming more common at the fringes of academic discussion, though not yet in a form suitable to trickle down to the courts. 54
Yet no plausible or practical justification for this very general approach has emerged. The abstractions of unjust enrichment do not map onto any plausible justification for its existence. There is accordingly an increasing gulf between the stated principles of unjust enrichment and any defensible scheme of liability. There was a constant insistence that the same rules should apply regardless of the type of benefit. The natural home for the question whether the claimant really deserves a remedy—the ‘unjust’ enquiry—was restated almost entirely in terms of the reality or otherwise of the claimant’s intent to benefit the defendant, which is a relevant consideration but far from the only one. Defences have proved very hard to generalise, and in consequence they have stagnated. Overall, therefore, we have a theory which plays close attention to whether the claimant’s autonomy was compromised but very little to whether the defendant can make a similar complaint. It is therefore no great surprise that critics are starting to complain that unjust enrichment theory is too broad and neglects important differences between different types of claim.
Very late in the day, those more sympathetic to the theory of unjust enrichment have begun to ask about its moral underpinnings, but in consequence are finding it wanting. Weinrib finds it easy to justify the liability where the benefit has been freely accepted by the defendant, but correspondingly hard to do so where it is not. 55 Dagan finds it easy to justify the liability where it is striking a sensible balance between the defendant’s and the claimant’s autonomy but struggles in areas where the courts do not appear to be attempting any such balance. 56 And Webb, observing that we do not expect to find the law protecting all types of asset in exactly the same way—your salary, your pension and your house all receive legal protection, but not through identical sets of rules—argues that we should not expect ‘unjust enrichment’ rules relating to each to be the same either. 57 None of the three draws what we might call the obvious conclusion—that a law which is so hard to justify might not actually be a law we should wish to have—but we seem to be moving closer to that conclusion, if only by a process of elimination. Unjust enrichment theory was deliberately and ostentatiously promoted without regard to moral considerations, and so can be expected to need major amendment if those considerations are now back in the frame.
A recurrent defence is that unjust enrichment is a young discipline, and while it is obvious that there are problems, we should not be quick to assume that there is any fundamental difficulty. But 80 years after the Restatement (1st) and 50 years after Goff and Jones (1st), that excuse is wearing awfully thin. The same might be said of the argument that academic accounts are now becoming more sophisticated, and so are finding ways around the theoretical problems. This ‘sophistication’ largely consists of knowing when recourse to theory will not help, of allowing key concepts to bear different meanings in different contexts because we know that there is no single meaning that fits with the law. The truth may be that just as this area has always been confused in the past for lack of a convincing principle to bind it together 58 —after all, it largely consists of leftovers that other areas of law have discarded as incapable of integration into theory—what we are now seeing is a mere continuation of that, the creation of a category with a superficially impressive general theory but actually making no moral or practical sense—or (as Birks might have put it 59 ), a merely contextual category masquerading as a principled one. At all events, it is not to be expected that the judiciary will be motivated by any strong desire for theoretical purity when so little reason has been given to support it. The judicial reaction to the unjust enrichment theory is the subject of the next section.
Judicial application of unjust enrichment theory
Given the rigidity of current unjust enrichment theory, and its general acceptance by the judiciary—but given also that judges prefer to reach defensibly just results rather than the contrary—clearly something has to give. In some areas of law, no doubt, the loser would be the judiciary’s sense of justice. In many areas of tax law and commercial law (for example), it would be thought inappropriate or even fallacious to ask about the fairest solution, and that the judge’s best hope of contributing to the public good would be by rigid and predictable adherence to the rules, keeping a firm lid on any apparent demand of justice. But by-and-large unjust enrichment cases do not seem to be in that category. Unjust enrichment cases typically involve situations for which no one had planned or specified a solution in advance—there is therefore little occasion to call for judicial certainty in resolving the matter. As this section illustrates, there are multiple ways in which theory bends with or defers to the judicial sense of what is a sensible conclusion. Given a choice between theory and justice, a clear preference for justice is being expressed.
In what follows, the focus is on cases in the last 10 years. In earlier years, judicial straining at theory could be (and often was) dismissed as merely indicating judicial unfamiliarity with unjust enrichment theory. Yet it is getting rather late for such excuses. The judges are now as familiar with unjust enrichment theory as they are ever likely to be and seem very used to the four-fold analysis (of asking whether (1) there is injustice, (2) there is enrichment, (3) it was at the claimant’s expanse and (4) there is a defence). Clearly, the judges have carved out for themselves considerable room for manoeuvre, despite the strait-jacket to which a pedantic instance on theory would confine them. The precise scope of this room for manoeuvre is a matter for debate. At all events, though, the range of judicial choice is wide and shows no signs of narrowing.
General references to ‘unjust enrichment’
‘Unjust enrichment’ is still regularly used in a very general sense, much broader than academic theorists would typically use it. Actions for profits made from another’s intellectual property are often so referred to. 60 The statutory defence of ‘unjust enrichment’, to prevent recovery of wrongly paid tax where the payer has already passed on the loss to their customers, is in rude health and accounts for a very high proportion of references to the phrase in modern case law. 61 A judge may refer to an unjust enrichment claim as one for ‘an equitable wrong’ 62 without any risk of being misunderstood. And it is routine to refer to ‘unjust enrichment’ to mean simply that a claimant has received an inappropriately generous remedy, whether through an over-wide injunction 63 or simply by double compensation. 64
There is of course no judicial confusion here. In these vaguer references to ‘unjust enrichment’, there is no suggestion that we should be applying the four-fold analysis. The point is that the judges have accepted the notion of unjust enrichment but have not entirely accepted the technical paraphernalia that, for many academic theorists, goes along with it: crudely, when the judges say ‘unjust’ and ‘enrichment’ they mean unjust and enrichment, and it is perfectly sensible to use those terms without any particular theory in mind. ‘Unjust enrichment’ is substance not technicality. 65 There is to the judicial mind no sharp division between cases where these terms are used loosely or untechnically, and cases where they must be given some (radically different) technical meaning.
Unjust enrichment theory as ‘broad headings’
In the narrower class of strict unjust enrichment cases, where the four questions are now routinely asked, there appears to be a judicial consensus that those questions are merely broad headings, rather than anything more precise. Further, it is emphasised that these heading interrelate and need not be treated as rigid logical units. The wise approach is not to treat them as entirely distinct enquiries, because the way in which each one is approached has knock-on effects for how the others can be approached. The classic statement is by Henderson J: I have no quarrel with this basic conceptual structure. It needs to be remembered, however, that the four questions are no more than broad headings for ease of exposition. They should not be approached as if they had statutory force. There may also be a considerable degree of overlap between the first three questions. I would add that the development of a coherent set of defences, including in particular the defence of change of position, is important, because it should encourage the court not to adopt an unduly narrow or restrictive approach in considering whether the first three questions are satisfied.
66
the adoption of the concept of unjust enrichment in the modern law, as a unifying principle underlying a number of different types of claim, does not provide the courts with a tabula rasa, entitling them to disregard or distinguish all authorities pre-dating Lipkin Gorman…Although judicial reasoning based on modern theories of unjust enrichment is in some respects relatively novel, there are centuries’ worth of relevant authorities, whose value should not be underestimated. The wisdom of our predecessors is a valuable resource, and the doctrine of precedent continues to apply. The courts should not be reinventing the wheel.
69
Graham Virgo has made it plain that he is not happy with this, protesting that reducing unjust enrichment to broad headings means that ‘the judge is encouraged to exercise arbitrary choice based on perceptions of fairness rather than the exercise of a principled and defensible discretion, [which] reflects judging in the twenty-first century at its flexible, flabby worst’. 73 Yet this view seems to have no traction within the judiciary. The common law develops by judges making choices, largely on the basis of the merits (in fairness, in logic, in respect for precedent, in commercial common sense) of each case. Merely sticking pejorative labels on this (arbitrary choice based on perceptions of fairness) does not really advance the argument much one way or another. 74
‘Unjust’
As noted above, much of the paraphernalia of unjust enrichment theory is becoming more constraining. We can note in particular the increasing rigidity in relation to ‘enrichment’, 75 and the narrowness that defences have always exhibited. 76 Faced with such limitations on the range of permissible legal arguments, there are correspondingly fewer ways in which the judicial sense of fairness can be expressed. Academic theory tries to restrict the meaning of ‘unjust’ as well, 77 but that is the obvious point at which the judges would consider the merits of the claim. It is therefore not too surprising that it is in the justice enquiry that the judges today show themselves most flexible, and that where the judges find no clear precedent to decide the issue then they answer it themselves.
In a range of cases, therefore, we see judges dealing with the ‘unjust’ enquiry by simply asking whether the claim is a just one, without reference to ‘unjust factors’. 78 No doubt in some of these cases, the judicial conclusion can be reconciled with existing unjust enrichment theory; but the point is that unlike other contexts within the law of unjust enrichment, the judges seem to feel no significant need to do so. While in other respects theory is paid great respect, on this matter theory is left to look after itself. Theorists may indeed attempt to pick up the pieces after the latest judicial forays into ‘injustice’, but there is no question of academics being allowed to lead the way as they otherwise have been.
The most discussed recent example of this is Menelaou, 79 where the disregard for theory is indeed quite blatant. Lord Clarke simply stated that there could be no doubt that the enrichment was unjust, and then proceeded to give an (obviously theoretically deficient) analysis of this in terms of unjust factors. 80 Lord Neuberger gave an extremely clear account of why justice required a remedy but used no theory and made no case references in the course of so doing. 81 Of course, a critic who expects judicial adherence to theory sees a weakness here. Virgo expects the judges to justify themselves by the body of theory devised to rationalise the case law on the injustice enquiry: so in his eyes Lord Clarke is guilty of a failure of analysis, and Lord Neuberger is confused. 82 But what we have on the page is something simpler: the court was asked whether the enrichment was unjust and the judges gave the uncomplicated answer. 83 While theorists have done their best to expel the question of injustice and replace it with abstract theory, it has run back in again despite their urgings.
The point is all the stronger because of the recent ruling in Pitt, which declared straightforwardly that the test for whether mistaken gifts should be set aside in equity was whether it was unjust not to do so.
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‘The injustice (or unfairness or unconscionableness) of leaving a mistaken disposition uncorrected must be evaluated objectively, but with an intense focus …on the facts of the particular case’.
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This opinion is particularly striking because Lord Walker (speaking for the court) expressly confronted the criticism that the court was not applying the law but was substituting its own view of the merits of the claim—and answered that forming and implementing a view of the merits was precisely what the law required. Quoting Goff and Jones to the effect that a test which allowed the court to judge the merits was ‘susceptible to judicial manipulation’,
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he commented that: the apparent suggestion that the court ought not to form a view about the merits of a claim seems to me to go wide of the mark…The court cannot decide the issue of what is unconscionable by an elaborate set of rules. It must consider in the round the existence of a distinct mistake (as compared with total ignorance or disappointed expectations), its degree of centrality to the transaction in question and the seriousness of its consequences, and make an evaluative judgment whether it would be unconscionable, or unjust, to leave the mistake uncorrected. The court may and must form a judgment about the justice of the case.
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Unjust enrichment as discretionary liability
Yet herein lies the problem: respect for the rule of law, and fear of arbitrary judging, makes commentators very reluctant to acknowledge judicial discretion when they see it. If it appears that judges are acting on their views of justice, does that mean that the law has become discretionary? In considering this question, there is a regrettable tendency to battle with opponents of straw rather than actual points of view. No one really believes that judges are or should be free to say whatever comes into their heads, without regard for precedent, but equally no one really believes that the legal rules properly understood make decisions for the judge, leaving her/him with no choice in the matter. The real arguments in any one context are more in the middle—legal rules and precedents constrain judges somewhat, and the argument is over whether that constraining force should be increased (by clarification of the rules) or diminished (by emphasising fact-dependence and reasonable dispute resolution). Nor is it any particular surprise to find that academic commentators tend to favour rules over circumstances rather more so than do judges.
Assuming that the matter is understood on that basis—that judicial choice is always exercised in the context of legal rules and precedents—then the argument of this article is that the imposition of liability in unjust enrichment is always a matter of judicial choice, though very often that choice is a simple and obvious one. In other words, in this area of law no judge who considers a particular claim to be an unfair one is ever obliged to allow it, as there is always a perfectly proper route to deny liability. Whether that fact is best summed up by saying that liability in unjust enrichment is ‘discretionary’ may be a matter for argument—some legal systems (such as the Canadian 88 and Scottish 89 systems) expressly acknowledge the judicial choice here, though the preferred expression is that liability is ‘equitable’ rather than it is ‘discretionary’. Whether liability is in other sense discretionary—and in particular, the extent to which judges are free to extend liability past traditional bounds merely on their own say-so—is another question entirely: no judge thinks that ‘unjust enrichment’ means whatever they want it to mean, and no commentator thinks that the legal system would be better if they did. 90
Historically of course it was unnecessary to state this expressly—both common law and equity had a certain amount of flexibility built in, in equity’s case through the discretionary nature of its remedies and in the common law case because liability could only be established by convincing a jury that it was appropriate. In modern times, the picture is more mixed, but the general pattern is still clear.
Courts today are uncomfortable with the blatant moralising of 19th and early 20th century opinions, preferring to use the language of public policy when refusing claims that, for the good of the community, should not be allowed. Equally however they do not imagine that this issue can simply be reduced to rules. The precise language that should be used here has been a matter of some debate, though all of the live proposals have been more-or-less open about the discretionary nature of the issue, including the current preferred solution (‘the structured approach’ 91 ).
– In areas which are still recognised as equitable, it is still trite law that remedies are discretionary, and so can be refused by a judge who can state a reason why liability would be unfair in the case under consideration 92 ; the remedy is to be moulded by ‘practical justice’. 93 This is too is of course a structured discretion—the basic equitable pattern of analysis has been established for several centuries now, and it would take extraordinary circumstances to come up with a form of injustice that was wholly without precedent.
– Common law areas by contrast tend to avoid explicit reference to discretion, while still giving significant room for judicial manoeuvre. As discussed above, 94 much of this is achieved by the use of inherently flexible concepts such as ‘injustice’ or ‘voluntariness’. A surprising degree of flexibility has also been found in the concept of ‘mistake’. For example, in cases where payment of tax is made and then subsequent judicial decision holds that it was not payable, there are real logical difficulties involved is deciding whether there was a mistaken payment, but liability in mistake is uniformly granted—and ‘the reasoning is based upon practical considerations of fairness and not abstract juridical correctitude’. 95 Or again, there might be clear evidence of a mistake and of its causative effect, yet the claimant finds that it was apparently the wrong sort of mistake. 96
There are therefore a variety of ways in which the judicial sense of fairness may manifest itself, and I am certainly not aware of any recent cases where a judge protests that, due to the rigour of unjust enrichment theory, an unjust conclusion is being forced upon the court.
Discretion denied
In the light of this general climate of discretionary liability—whereby unjust enrichment is kept on a short leash by the judicial ability to deny it where circumstances seem to require this—what are we to make of the occasional judicial denial that unjust enrichment liability is discretionary? It will already be clear that such statements are at best rather misleading. But a closer look reveals that we can be more precise than that. Instances of insistence that liability in unjust enrichment is automatic in practice tend to fall into two categories.
Firstly, in many instances, the intent is merely to deny—or at least to minimise—the possibility of extensions of liability by liberal reference to ‘unjust enrichment’. 97 In other words, denying that unjust enrichment is a matter of discretion often means only that judges cannot create new instances of liability merely by declaring that the defendant is unjustly enriched. This is of course entirely correct—and quite different from asking whether judges can adjust existing principles to meet the equities of individual cases, stating clear principles of liability yet disapplying those principles where they work injustice.
Second, in some classes of situation, the equities are pretty firmly in the claimant’s favour: if the court has a discretion, it is usually clear beyond all question which way the court will use that discretion. In the wide swathe of claims that today go under the label of unjust enrichment, there are not all that many such categories of case—unjust enrichment claims are very various. But there are a few, and it is no surprise to see that it is in those cases that the court says it has no choice in the matter but must order restitution.
One such is the case where property is taken from its owner and ends up in the defendant’s hands. Absent a defence such a defence of position or limitation, it is hard to see how the defendant can possibly persuade the court that refusing a remedy to the owner would be just. It therefore makes great sense to deny that the claim is subject to judicial discretion. 98 That is as it should be, but it is not incompatible with the argument made here. The question whether the court can refuse a claim as unfair only arises in cases where some unfairness is apparent.
The other major instance is that of the recovery of wrongly paid tax, which is perhaps the leading context where judges tend to deny that they have a discretion.
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Again, it is hard to think of circumstances where a judge could possibly be persuaded that retention of the money by the taxing authorities would be just. Stating that the money was recoverable as of right, unless perhaps the taxpayer makes their claim too late or has already been repaid by another route, is not a denial that the judges can consider the equities, but on the contrary is a sure sign that they have considered them. As Lord Goff commented in Woolwich, The justice underlying the Woolwich’s submission is, I consider, plain to see. Take the present case. The Revenue has made an unlawful demand for tax. The taxpayer is convinced that the demand is unlawful, and has to decide what to do. It is faced with the Revenue, armed with the coercive power of the State, including what is in practice a power to charge interest which is penal in its effect. In addition, being a reputable society which alone among building societies is challenging the lawfulness of the demand, it understandably fears damage to its reputation if it does not pay. So it decides to pay first, asserting that it will challenge the lawfulness of the demand in litigation. Now, the Woolwich having won that litigation, the Revenue asserts that it was never under any obligation to repay the money, and that it in fact repaid it only as a matter of grace. There being no applicable statute to regulate the position, the Revenue has to maintain this position at common law. Stated in this stark form, the Revenue’s position appears to me, as a matter of common justice, to be unsustainable; and the injustice is rendered worse by the fact that it involves, as Nolan J pointed out, the Revenue having the benefit of a massive interest-free loan as the fruit of its unlawful action. I turn then from the particular to the general. Take any tax or duty paid by the citizen pursuant to an unlawful demand. Common justice seems to require that tax to be repaid, unless special circumstances or some principle of policy require otherwise; prima facie, the taxpayer should be entitled to repayment as of right.
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Conclusion
Properly understood, there is nothing shocking or surprising in the notion that restitutionary liability is discretionary. To agree that this is so is merely to admit that legal logic can never decide the case for the judge (an obvious truism), and that judges take seriously their duty to come to a reasoned decision. And the perennial bugaboo of the maverick judge who takes the law in extraordinary and unjustifiable directions is never a real danger. Where individual judges have made a significant mark on the law, it has always been not by their personal eccentricities but by persuading their colleagues of the rightness of particular legal innovations. Our trust must be placed not in individuals but in legal dialogue and debate, to which academics as well as judges can make their contribution.
Yet it is difficult to engage in a satisfactory dialogue without an appropriate language for it. The theory of unjust enrichment, whatever its other merits, provides no clear rationale for the existing law, and no recipe for developing it other than a constant search for consistency of application—which is one desirable feature, but only one. Necessarily, therefore, proper development of the law must take another path.
Footnotes
Author’s note
An earlier version of this article was given at the SLS annual conference at University College Dublin on 7 September 2017. The author thanks all who contributed at that event.
Conflict of interest
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.