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You are here: BAILII >> Databases >> The Law Commission >> AGGRAVATED, EXEMPLARY AND RESTITUTIONARY DAMAGES [1997] EWLC 247(3) (16 December 1997)
URL: http://www.bailii.org/ew/other/EWLC/1997/247(3).html
Cite as: [1997] EWLC 247(3)
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PART III
RESTITUTION FOR WRONGS
1. THE LAW OF RESTITUTION
3.1 In Lipkin Gorman v Karpnale Ltd, (1) the House of Lords accepted for the first time that there is an English law of restitution based on the principle against unjust enrichment. There is now a wide measure of consensus among commentators that the law of restitution has two main divisions: unjust enrichment by subtraction (or autonomous unjust enrichment) and unjust enrichment by wrongdoing (or dependent unjust enrichment). (2) The difference between those two divisions is that the latter depends on the commission of a wrong by the defendant to the plaintiff (whether that wrong is a tort or a breach of contract or an equitable wrong, such as breach of a fiduciary duty or breach of confidence). The enrichment is at the expense of the plaintiff in the sense that the defendant has committed a wrong to the plaintiff. Restitution, concerned to strip away the gains made by the defendant by the wrong, is only one of several possible remedial responses, of which the most common is compensation. In contrast, in unjust enrichment by subtraction, no wrong needs to have been committed by the defendant and the enrichment is at the expense of the plaintiff in the more obvious sense that the gain to the defendant represents a loss to, or a subtraction from the wealth of, the plaintiff. The grounds for restitution in unjust enrichment by subtraction tend to comprise factors vitiating or qualifying the plaintiffs true consent to a transfer of his or her wealth to the defendant: for example, mistake, duress, undue influence, and failure of consideration.
3.2 In this paper we are essentially concerned with unjust enrichment by wrongdoing (that is, restitution for wrongs). (3) We are concerned to identify when a plaintiff is entitled, or ought to be entitled, to a stripping of the gains made by a civil wrong.
3.3 Historically, a number of differently labelled remedies have performed the role of stripping away gains made by a civil wrongdoer: for example, the award of money had and received (especially in the so-called waiver of tort cases), an account of profits, and restitutionary damages (where the damages are assessed according to the gains made by the wrongdoer rather than the loss to the plaintiff).
3.4 It is only comparatively recently - with the recognition of, and increased interest in, the law of restitution - that it has come to be appreciated that the law often is concerned to strip away gains made by a wrong. No-one would pretend that restitution in this context is as well-established and uncontroversial as compensation. And there are cases (sometimes analysed as awarding restitution) where one can realistically argue that the plaintiff has suffered a loss, in the extended sense that the plaintiff has not been paid what he or she would have charged for permitting the defendants conduct. (4) But to deny that the law does award restitution for some civil wrongs, and to argue that all past decisions have in reality been awarding compensation, would, in our view, be to distort the truth.
2. RESTITUTION FOR WRONGS: PRESENT LAW
3.5 It is convenient to divide the present law on restitution for wrongs into three parts: restitution of enrichments gained by a tort; restitution of enrichments gained by an equitable wrong; and restitution of enrichments gained by a breach of contract.
(1) Enrichments gained by a tort
3.6 A word first needs to be said about waiver of tort. This is a confusing concept and it carries more than one meaning. It is normally used to refer to a sitaution in which a plaintiff seeks a restitutionary remedy for a tort rather than compensatory damages. So, for example, in the leading case of United Australia Ltd v Barclays Bank Ltd (5) the plaintiff initially brought an action for money had and received by conversion of a cheque. This was a claim for restitution of the gains made by the tort of conversion and the plaintiff was described as waiving the tort. Yet this did not mean that the plaintiff was excusing the tort, so that, when that claim was abandoned prior to judgment, the plaintiff was nevertheless entitled to bring an action claiming compensatory damages for conversion of the cheque by another party. Viscount Simon LC said:
When the plaintiff waived the tort and brought assumpsit, (6) he did not thereby elect to be treated from that time forward on the basis that no tort had been committed; indeed, if it were to be understood that no tort had been committed, how could an action in assumpsit lie? It lies only because the acquisition of the defendant is wrongful and there is thus an obligation to make restitution ... The substance of the matter is that on certain facts he is claiming redress either in the form of compensation, ie damages as for a tort, or in the form of restitution of money to which he is entitled, but which the defendant has wrongfully received. The same set of facts entitles the plaintiff to claim either form of redress. At some stage of the proceedings the plaintiff must elect which remedy he will have. (7)
3.7 There are two other meanings of the phrase waiver of tort. One refers to a principle of agency law whereby the victim of a tort can choose to give up his right to sue for a tort by treating the tortfeasor as having been authorised to act as the plaintiffs agent and then relying on standard remedies against an agent to recover the profits made. In this situation, the tort is truly extinguished. (8) The other meaning refers to where the plaintiff chooses to ignore the tort and instead rests his or her claim to restitution on unjust enrichment by subtraction; for example, a plaintiff, who has been induced to transfer money to the defendant by the defendants fraudulent misrepresentation, may ignore the tort of deceit and seek restitution of the payment from the defendant within unjust enrichment by subtraction on the basis that it was paid by mistake. (9)
3.8 In this paper we are essentially concerned with waiver of tort in its first, and usual, sense. That is, we are concerned with restitution for a tort. One must be careful to ensure, however, that one does not cite, as supporting restitution for a tort, cases that rest on waiver of tort in one of its other two senses.
3.9 In examining restitution for torts, it is helpful to divide between:
· proprietary torts, excluding the protection of intellectual property
· intellectual property torts
· other torts
(a) Proprietary torts, excluding the protection of intellectual property
3.10 Restitutionary remedies have long been granted for proprietary torts, such as conversion, (10) trespass to goods, (11) and iff must elect before judgment which of them he wishes to pursue. These principles are not only fair but ... well established by authority. It is true that in earlier cases it has not been expressly stated that a claim for mesne profit for trespass can be a claim for restitution. Nowadays I do not see why we should not call a spade a spade. (16)
3.13 A significant feature of restitution for proprietary torts is that it is not a pre-condition that the defendant was acting dishonestly or in bad faith or cynically. While it may be said that the proprietary torts normally require intentional conduct (for example, the tort of conversion normally requires that the defendant intended to deal with the goods in question), it is no defence to the tort, including a restitutionary remedy for the tort, that the defendant honestly and reasonably believed that the property was his rather than the plaintiffs. So if the defendant sells the plaintiffs goods, the plaintiff is entitled to restitution of the sale profits even though the defendant honestly believed them to be his own. Similarly, if the defendant uses anothers goods, it would seem that the owner is entitled to damages assessed according to a reasonable hiring charge, even though the defendant honestly believed them to be his own.
3.14 The Court of Appeals decision in the trespass to land case of Phillips v Homfray (17) has traditionally been regarded as hampering the recognition of restitution for torts. The deceased had trespassed by using roads and passages under the plaintiffs land to transport coal. In an earlier action the plaintiff had been granted damages to be assessed for the use of the land against the (then living) tortfeasor. The question at issue was whether this action survived against the deceaseds executors despite the actio personalis rule then barring the survival of tort claims. The majority (Baggallay LJ dissenting) held that it did not survive on the ground that for a restitutionary remedy (at least, for one that is to survive against a deceaseds executors) the gain made by the tortfeasor must comprise the plaintiffs property or the proceeds of that property. Therefore no award survived in respect of the expense which the deceased had saved by his wrongful use of the plaintiffs land.
3.15 On one view, the decision was inextricably tied up with the actio personalis rule and has no validity now that that rule has gone. (18) On another view, the decision was concerned with unjust enrichment by subtraction because restitution for the tort of trespass to land was barred by the actio personalis rule. (19) On yet another view, the decision is simply wrong, in drawing an arbitrary distinction between types of benefit and in confusing personal and proprietary rights, and should be overruled. (20)
3.16 Whichever view is taken the same essential conclusion is reached, namely that the majoritys approach should not today be regarded as restricting the availability of restitution for trespass to land or any other tort. It is therefore unsurprising that in recent times restitutionary remedies have been awarded for torts, including in trespass for land cases (21) which, if the decision were of general validity, would contradict Phillips v Homfray. (22)
3.17 One modern decision of the Court of Appeal is inconsistent with the laws recognition of restitution for proprietary torts. In Stoke-on-Trent City Council v W & J Wass Ltd (23) the defendant had committed the tort of nuisance by operating a Thursday market from 12 April 1984 within a distance infringing the plaintiff councils proprietary market right (that is, within 6 2/3 miles of the plaintiffs same day market). At first instance, Peter Gibson J granted the plaintiff, from 4 March 1987, a permanent injunction to restrain further infringement of its right. He also awarded substantial damages, not on the basis that the plaintiff had suffered any loss of custom, but on the basis of an appropriate licence fee that the plaintiff could have charged the defendant for lawful operation of its market from 12 April 1984 to 4 March 1987. The defendant company successfully appealed against the award of substantial damages, the Court of Appeal holding that the plaintiff was entitled merely to £2 nominal damages.
3.18 On the facts, the plaintiff would not have granted the defendant the right to hold the market and therefore Peter Gibson Js award at first instance is better viewed as restitutionary (stripping away part of the defendants wrongfully acquired gains) rather than compensatory. In the Court of Appeal the whole question was approached as if only compensatory damages could be awarded. Indeed it was only at the very end of Nourse LJs judgment that there was any reference to restitution. He said,
It is possible that the English law of tort, more especially of the so-called proprietary torts will in due course make a more deliberate move towards recovery based not on loss suffered by the plaintiff but on the unjust enrichment of the defendant - see Goff and Jones The Law of Restitution, 3rd ed (1986), pp 612-614. But I do not think that that process can begin in this case and I doubt whether it can begin at all at this level of decision. (24)
The approach in Wass has been heavily criticised by commentators. (25)
(b) Intellectual property torts
3.19 These are civil wrongs which are now either statutory torts (for example, infringement of a patent, infringement of copyright, infringement of design right) or common law torts (for example, infringement of trade mark and passing off). The reason why it is convenient to treat them separately from other proprietary torts is that restitution for these torts, through the equitable remedy of an account of profits, is very well-established and no doubt historically reflects the fact that these torts started life as equitable wrongs.
3.20 So an account of profits may be ordered for the torts of passing off (26) or infringement of trade mark, (27) although it appears that dishonesty is here a pre-condition of the restitutionary remedy, (28) albeit not of a claim for compensation. (29) The classic statement in an English case of the purpose of an account of profits was made by Slade J in My Kinda Town Ltd v Soll, (30) in which the plaintiffs claimed that the defendants were passing off their chain of restaurants as the plaintiffs. Slade J said, "The purpose of ordering an account of profits in favour of a successful plaintiff in a passing off case ... is to prevent an unjust enrichment of the defendant". (31)
3.21 In Colbeam Palmer Ltd v Stock Affiliates Pty Ltd, (32) an infringement of trade mark case, Windeyer J said the following:
The distinction between an account of profits and damages is that by the former the infringer is required to give up his ill-gotten gains to the party whose rights he has infringed: by the latter he is required to compensate the party wronged for the loss he has suffered. The two computations can obviously yield different results, for a plaintiffs loss is not to be measured by the defendants gain, nor a defendants gain by the plaintiffs loss. Either may be greater, or less, than the other. If a plaintiff elects to take an inquiry as to damages the loss to him of profits which he might have made may be a substantial element of his claim ... But what a plaintiff might have made had the defendant not invaded his rights is by no means the same thing as what the defendant did make by doing so ... [T]he account of profits retains the characteristics of its origin in the Court of Chancery. By it a defendant is made to account for, and is then stripped of, profits he has made which it would be unconscionable that he retain. These are profits made by him dishonestly, that is by his knowingly infringing the rights of the proprietor of the trade mark. This explains why the liability to account is still not necessarily coextensive with acts of infringement. The account is limited to the profits made by the defendant during the period when he knew of the plaintiffs rights. So it was in respect of common law trade marks. So it still is in respect of registered trade marks ... I think that it follows that it lies upon a plaintiff who seeks an account of profits to establish that profits were made by the defendant knowing that he was transgressing the plaintiffs rights. (33)
3.22 Turning to the statutory intellectual property torts, it is laid down in statute that an account of profits may be ordered for infringement of a patent, (34) infringement of copyright, (35) infringement of design right, (36) and infringement of performers property rights. (37) Statutory provisions further lay down that the standard of fault required to trigger an account of profits for patent infringement is negligence, (38) whereas for infringement of copyright, (39) primary infringement of design right, (40) and infringement of performers property rights, (41) an account of profits may be ordered on a strict liability basis (that is, it is not a defence that the defendant did not know, and had no reason to believe, that copyright or design right existed in the work or design to which the action relates). As we have seen, a strict liability approach to restitutionary remedies for a tort is applied in respect of other proprietary torts. (42) However, it clashes with what appears to be the approach in respect of the common law intellectual property torts.
(c) Non-proprietary torts
3.23 When one moves to examine the non-proprietary torts, it is much more difficult to find examples of cases illustrating the award of restitution for a tort. In particular, waiver of tort cases that are sometimes cited as illustrations (43) turn out on closer inspection to be better (or, at least, equally well) interpreted as cases within unjust enrichment by subtraction (that is, waiver of tort is being used in the third sense set out above). (44)
3.24 It is also significant that in Halifax Building Society v Thomas (45) the Court of Appeal has recently denied a plaintiff a restitutionary claim to the gains made by the tort of deceit. After earlier pointing out that counsel for the plaintiff had accepted that "there is no English authority to support the proposition that a wrongdoing defendant will be required to account for a profit which is not based on the use of the property of the wronged plaintiff", Peter Gibson LJ said:
There is no decided authority that comes anywhere near to covering the present circumstances. I do not overlook the fact that the policy of law is to view with disfavour a wrongdoer benefiting from his wrong, the more so when the wrong amounts to fraud, but it cannot be suggested that there is a universally applicable principle that in every case there will be restitution of benefit from a wrong. (46)
3.25 Yet, as we shall see below, (47) Lord Devlins second category of exemplary damages is concerned to punish those who cynically commit torts with a view to making profits. If the law is prepared to award exemplary damages against the cynical profit-seeking tortfeasor, it must be willing to go to the less extreme lengths of awarding restitution against such a tortfeasor. This is particularly obvious when one realises that a restitutionary remedy need not strip away all the gains made by the tortfeasor; rather the remedy can be tailored to remove a fair proportion of the gains, taking into account, for example, the skill and effort expended by the defendant.
3.26 In Broome v Cassell (48) Lord Diplock recognised the interplay within the second category of exemplary damages between restitution and the more extreme remedial response of punishment when he said the following:
[The second category] may be a blunt instrument to prevent unjust enrichment by unlawful acts. But to restrict the damages recoverable to the actual gain made by the defendant if it exceeded the loss caused to the plaintiff, would leave a defendant contemplating an unlawful act with the certainty that he had nothing to lose to balance against the chance that the plaintiff might never sue him, or if he did, might fail in the hazards of litigation. It is only if there is a prospect that the damages may exceed the defendants gains that the social purpose of this category is achieved - to teach a wrongdoer that tort does not pay. (49)
3.27 It therefore seems to us that the true reason why restitution was inappropriate in Halifax Building Society v Thomas (50) was the same reason why exemplary damages would also have been inappropriate (had they been pleaded): namely, that the defendant was the subject of a criminal conviction and confiscation order which was sufficient to reverse his unjust enrichment and to punish him for his fraud.
(2) Enrichments gained by an equitable wrong
3.28 It is a surprising fact, which reflects the unfortunate influence still exerted by the common law/equity divide, that when one turns ones attention from torts to equitable wrongs, such as breach of fiduciary duty and breach of confidence, the availability of restitution, through the remedy of an account of profits, is both well-established and uncontroversial. While compensation (whether through the remedies of equitable damages or equitable compensation) may also be available, the account of profits is in no sense regarded as unusual or difficult to justify.
3.29 The account of profits is, therefore, standardly used to ensure that a fiduciary does not make secret unauthorised profits out of his or her position, (51) and to ensure the disgorgement to principals of bribes made to their fiduciaries. (52) It is noteworthy that the account of profits may be awarded even if (as shown in the secret profit cases) the fiduciary was not acting dishonestly or in bad faith.
3.30 Similarly, it is well-established that an account of profits can be awarded for breach of confidence. In Peter Pan Manufacturing Corpn v Corsets Silhouette Ltd (53) an account of profits was ordered where the defendants had manufactured and sold brassieres knowingly using confidential information obtained from the plaintiffs. And in the leading case of Attorney-General v Guardian Newspapers Ltd (No 2) (54) the Sunday Times was held liable to an account of profits, for breach of confidence to the Crown, in publishing extracts of Peter Wrights book, "Spycatcher", at an early stage before the information had reached the public domain. Lord Goff said the following:
The statement that a man shall not be allowed to profit from his own wrong is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case. That there are groups of cases in which a man is not allowed to profit from his own wrong, is certainly true. An important section of the law of restitution is concerned with cases in which a defendant is required to make restitution in respect of benefits acquired through his own wrongful act - notably cases of waiver of tort; of benefits acquired by certain criminal acts; of benefits acquired in breach of a fiduciary relationship; and, of course, of benefits acquired in breach of confidence. The plaintiffs claim to restitution is usually enforced by an account of profits made by the defendant through his wrong at the plaintiffs expense. This remedy of an account is alternative to the remedy of damages, which in cases of breach of confidence is now available, despite the equitable nature of the wrong, through a beneficent interpretation of the Chancery Amendment Act 1858 (Lord Cairns Act), and which by reason of the difficulties attending the taking of an account is often regarded as a more satisfactory remedy, at least in cases where the confidential information is of a commercial nature, and quantifiable damage may therefore have been suffered. (55)
3.31 In the context of breach of confidence, it may be that the courts will award damages (whether restitutionary or compensatory), rather than an account of profits, if the breach of confidence was committed without dishonesty. This is one explanation for Seager v Copydex Ltd (56) in which the defendants had manufactured a carpet grip, honestly and unconsciously making use of confidential information given to them by the plaintiff. The Court of Appeal ordered damages to be assessed (apparently on a restitutionary basis). Lord Denning MR said,
It may not be a case for injunction or even for an account, but only for damages, depending on the worth of the confidential information to him in saving him time and trouble. (57)
3.32 Restitution for breach of fiduciary duty and breach of confidence is so well-established that the area of debate focuses, not on whether restitution rather than compensation should be awarded, but rather on whether restitution should be effected by merely a personal remedy (account of profits) or by a proprietary remedy (constructive trust). Despite Lister v Stubbs, (58) which denied that a proprietary remedy should be awarded in respect of a bribe and sought to maintain a clear divide between obligation and ownership, the law appears to be moving towards recognising that a proprietary restitutionary remedy (through a constructive trust) is appropriate for all instances of (at least dishonest) breach of a fiduciary duty and breach of confidence. Particularly important was the Privy Councils decision in Attorney-General for Hong Kong v Reid (59) in which it was decided that, contrary to Lister v Stubbs, (60) a bribe was held on constructive trust. This had the result that the principal was entitled to trace through to land bought with the bribe.
(3) Enrichments gained by a breach of contract
3.33 An innocent party who has rendered part-performance before the contract was discharged may claim a restitutionary award as an alternative to the normal compensatory remedies for breach of contract by seeking a quantum meruit or, where there has been a total failure of consideration, the recovery of money paid to the defendant. These, however, are not remedies awarded for a wrong, but rather are generated by independent restitutionary claims for failure of consideration that are consequent on the contract being discharged for breach. (61)
3.34 The gain to a defendant from a breach of contract is generally irrelevant to the quantification of damages for that breach. The defendant will be liable to compensate the plaintiff for his expectation (or reliance) interest, but not to disgorge any profit the defendant may have gained from his breach of contract, nor to account for any expense saved thereby. As Megarry V-C said in Tito v Waddell (No 2):
... it is fundamental to all questions of damages that they are to compensate the plaintiff for his loss or injury by putting him as nearly as possible in the same position as he would have been in had he not suffered the wrong. The question is not one of making the defendant disgorge what he has saved by committing the wrong, but one of compensating the plaintiff. (62)
3.35 Similarly, in the leading case of Surrey County Council v Bredero Homes Ltd (63) the Court of Appeal declined to award restitutionary damages for a breach of contract where the defendant, to whom the plaintiff had sold land for a housing estate, had built more houses on the site than they had covenanted to build, thereby making a greater profit. Nominal damages were awarded on the ground that the plaintiff had suffered no loss. Restitutionary damages were held to be inappropriate because this was an action for ordinary common law damages for breach of contract: it involved neither a tort nor an infringement of proprietary rights nor equitable damages.
3.36 One exception to the rule denying restitution for breach of contract is Wrotham Park Estate Co Ltd v Parkside Homes Ltd, (64) where the defendants had built houses on their land in breach of a restrictive covenant in favour of the plaintiffs neighbouring land. A mandatory injunction was refused, since it would cause economic waste. At the trial of the action, Brightman J said:
If, for social and economic reasons, the court does not see fit in the exercise of its discretion, to order demolition of the 14 houses, is it just that the plaintiffs should receive no compensation and that the defendants should be left in undisturbed possession of the fruits of their wrongdoing? Common sense would seem to demand a negative answer to this question. (65)
Brightman J concluded that "a just substitute for a mandatory injunction would be such a sum of money as might reasonably have been demanded by the plaintiffs from [the defendants] as a quid pro quo for relaxing the covenant". (66) The plaintiffs would clearly never have granted such a relaxation. (67) Moreover, in deciding what was a reasonable price, substantial weight was given to the fact that the defendants had made £50,000 profit from the development, and damages were assessed at 5% of that profit. It would seem, therefore, that the damages were not compensating any losses suffered by the plaintiffs and are more appropriately viewed as restitutionary damages reversing the defendants unjust enrichment. The quantum is explicable as representing a fair proportion of the profits made by the defendants. Reference to what the parties would themselves have agreed was subsequently dismissed as "a fiction" by Steyn LJ in Surrey County Council v Bredero Homes, (68) although Steyn LJs comments were in turn criticised, and a compensatory analysis of the Wrotham Park case favoured, by the Court of Appeal in Jaggard v Sawyer. (69)
3.37 The conclusion to be reached, therefore, is that, in contrast to many torts and equitable wrongs, there is no tradition of awarding restitution for breach of contract - with the probable exception of a breach of a restrictive covenant. It should further be noted that, in contrast to torts, exemplary damages cannot be awarded in England for breach of contract. (70) Of course, this is not to deny that restitution (or exemplary damages) may be awarded for a tort or equitable wrong that constitutes a concurrent cause of action alongside the breach of contract. Breach of fiduciary duty is a particularly important example. (71)
3. RESTITUTION FOR WRONGS: REFORM
3.38 Our basic position, which we elaborate below, is that development of the law on restitution for wrongs is most appropriately left to the courts. The changes which we propose to effect by statute are limited to those which are necessitated by our proposals for an expanded, if constrained, remedy of exemplary damages. (72)
(1) Our basic position: development of the law is best left to the courts
(a) Restitution of enrichments gained by a tort
3.39 While to some it is odd to think of restitution, as opposed to compensation, being awarded as a remedy for a tort, careful examination of the law shows, as we have seen, that the courts have long been willing to award restitution for torts, especially for proprietary torts. This does not mean to say that the precise scope of torts for which restitution will be awarded is settled.
3.40 The justification for restitution for a tort - as for other civil wrongs - is at root to be found in the notion that no man shall profit from his own wrong. And while some might object to restitution on the ground that it gives the plaintiff a windfall, it is most important to emphasise that the effect of denying restitution is to leave the defendant with a wrongfully obtained windfall.
3.41 In the Consultation Paper we asked if the development of restitutionary damages should be left to the courts or effected by statutory provision. (73) The view of over two-thirds of consultees was that this area should be left to be developed by the courts. (74) This was particularly because it is an area which, until the relatively recent interest in the law of restitution, had been little explored or understood, and there is no consensus among commentators as to which torts should trigger restitution; incremental judicial development would therefore seem especially appropriate.
3.42 We agree. Accordingly, we recommend that:
(4) no attempt should be made to state comprehensively in legislation the situations in which torts should trigger restitution; subject to recommendation (7), the development of the law of restitution for torts should be left to common law development.
(b) Restitution of enrichments gained by an equitable wrong
3.43 We have seen that the focus of controversy is somewhat different in respect of restitution for equitable wrongs than for torts - that is, the controversy is not about whether restitution is available in respect of enrichments gained by an equitable wrong (which is well-accepted), but about the appropriate remedy for effecting restitution (personal or proprietary?). But we again believe, in line with the views of consultees, (75) that this area is best left to the courts to develop, and that, in general, statutory intervention would be inappropriate.
3.44 Accordingly, we recommend that:
(5) no attempt should be made to state comprehensively in legislation the situations in which equitable wrongs should trigger restitution; subject to recommendation (7), the development of the law of restitution for equitable wrongs should be left to common law development.
(c) Restitution of enrichments gained by a breach of contract
3.45 Several suggestions have been made to the effect that restitutionary damages ought to be more widely available for breach of contract. (76) For example, Birks has argued that restitutionary damages are appropriate where the breach of contract is cynical; (77) whilst Maddaugh and McCamus have argued that restitution may be appropriate where compensatory damages are inadequate. (78)
3.46 In the Consultation Paper our provisional view was that, in general, restitutionary damages should not be awarded for breach of contract, but that they should be, and arguably already are, available where a contract is specifically enforceable (79) and where the contract is made between fiduciaries. We isolated four arguments that have been made against the general availability of restitutionary awards. (80) First, many breaches of contract are made for commercial reasons and it is difficult to draw the line between innocent breach, for which there would be only compensation, and cynical breach, in which there would also be the option of restitution in the way suggested by some commentators. This would lead to greater uncertainty in the assessment of damages in commercial and consumer disputes. Secondly, in seeking restitution the plaintiff might be evading the requirements of the duty to mitigate. Thirdly, a restitutionary award is in reality a monetized form of specific performance but not all contracts are specifically enforceable. Fourthly, there may be difficulties of attribution. The making of a profit in excess of that which the plaintiff might have made had the contract been performed may require skill and initiative which should not be taken from the defendant save in exceptional cases.
3.47 Most consultees considered that the case for restitutionary (and exemplary) damages was less powerful in respect of breach of contract than for torts and equitable wrongs. And over two-thirds thought that, in any event, the extent to which restitutionary damages should be available should be left to development by the courts. (81) We agree that it would be dangerous to attempt to freeze in legislative form the extent to which, if at all, restitutionary damages should be available for breach of contract. Accordingly, we recommend that:
(6) no legislative provision should deal with whether (and if so, when) restitutionary damages may be awarded for breach of contract; the development of the law of restitution for breach of contract should be left to common law development.
(2) Exception: legislative reform required by our proposals on exemplary damages
3.48 Our basic position, which we describe above, is that the law of restitution for wrongs is most appropriately left for common law development. This extends to central questions, such as which wrongs should attract a restitutionary remedy. It also extends to less central questions, which we consider in the next section, such as the quantum of restitution, the relationship between compensation and restitution for wrongs, and the method for dealing with claims to restitution for wrongs by multiple claimants, or against multiple defendants.
3.49 Nevertheless, we do believe that a limited measure of legislative reform is required by our recommendations for a new approach to exemplary (or, as we propose to label them, punitive) damages. This limited reform has two elements:
(a) Restitutionary damages should be available where a defendant has committed a tort, an equitable wrong or a statutory civil wrong, and his conduct showed a deliberate and outrageous disregard of the plaintiffs rights
3.50 In Part V we recommend that punitive damages should not be available unless the defendant has committed a tort, (82) an equitable wrong, (83) or a civil wrong that arises under a statute, (84) and his conduct showed a deliberate and outrageous disregard of the plaintiffs rights. (85) We also recommend that punitive damages should never be available for breach of contract. (86)
3.51 In our view it would be unacceptable for legislation to lay down situations in which punitive damages can be awarded, if it did not also recognise that the less extreme remedy of restitution for a wrong (stripping away some or all of the gains acquired as a result of the wrong) should also be available in those situations. (87) We therefore recommend that:
(7) legislation should provide that restitutionary damages may be awarded where:
(a) the defendant has committed:
(i) a tort or an equitable wrong, or
(ii) a civil wrong (including a tort or an equitable wrong) which arises under an Act, and an award of restitutionary damages would be consistent with the policy of that Act, and
(b) his conduct showed a deliberate and outrageous disregard of the plaintiffs rights. (Draft Bill, clause 12(1)-12(3)).
Full discussion of the above conditions can be found in the relevant passages in Part V of this Report. (88)
3.52 It is important to emphasise that we do not thereby intend to cast doubt on other situations in which restitution may be awarded for wrongs. For example, it appears that restitutionary damages can be awarded for proprietary torts, such as trespass to land or conversion, without deliberate and outrageous wrongdoing: the basis of the restitutionary liability is strict. (89) We also do not intend to cast doubt on the availability of restitutionary remedies which are historically distinct from restitutionary damages, such as an account of profits for intellectual property torts, (90) or for breach of fiduciary duty. (91) And nor do we wish to limit future common law development of restitution for wrongs, including breach of contract. Thus, for example, courts will be left free to decide, in the future, that restitutionary damages may be obtained for a deliberate and outrageous breach of contract, or on some other (narrower or wider) basis.
3.53 We therefore recommend that:
(8) recommendation (7) should not prejudice any other power to award restitutionary damages for a wrong, nor remedies which also effect restitution for a wrong but which are historically distinct from restitutionary damages (eg an account of profits for an intellectual property tort). (Draft Bill, clause 12(5))
(b) Where restitutionary damages and punitive damages are claimed in the same proceedings, the judge alone should decide whether the defendants conduct was in deliberate and outrageous disregard of the plaintiffs rights
3.54 In Part V we recommend that, in a jury trial, the judge, not the jury, should decide whether punitive damages are available. The judge, not the jury, would therefore decide, inter alia, whether the defendants conduct showed a deliberate and outrageous disregard of the plaintiffs rights.
3.55 To allow juries to continue to decide, for the purposes of deciding claims to restitutionary damages, whether the defendants conduct showed a deliberate and outrageous disregard ..., would produce procedural complexity where a plaintiff claims both (i) restitutionary damages, and (ii) punitive damages. The reason is that one precondition of both claims is the same (did the defendants conduct show a deliberate and outrageous disregard of the plaintiffs rights?), but the question of whether it is satisfied would fall to be decided by two different decision-makers within the same action. The jury would decide the question for the purposes of the claim to restitutionary damages; the judge would decide the question for the purposes of the claim to punitive damages. This is obviously unsatisfactory.
3.56 In order to avoid such unsatisfactory complexity and the potential for conflict, we recommend that:
(9) the judge, and not the jury, should decide whether the defendants conduct showed a deliberate and outrageous disregard of the plaintiffs rights for the purposes of a claim to restitutionary damages, where both restitutionary damages and punitive damages are in issue in the same proceedings. (Draft Bill, clause 12(4))
This recommendation would entail that that common question is decided by one decision-maker only: the judge.
3.57 It is important to emphasise that we do not otherwise seek to alter the respective responsibilities of judge and jury when restitutionary damages are in issue. In particular, the jury will retain its present role in deciding whether a wrong (for example, defamation) has been committed, and in deciding the quantum of restitution. And, indeed, the division of responsibility between judge/jury will be entirely unaffected where restitution for wrongs is claimed on a basis other than that the defendant deliberately and outrageously disregarded the plaintiffs rights.
4. FOUR FURTHER ISSUES RELATING TO CLAIMS TO RESTITUTION FOR WRONGS
3.58 In this Part, we have essentially been looking at the question, when should there be restitution for a civil wrong? In this section, we turn to four further questions that arise if restitution is available for a particular wrong:
· What should be the quantum of restitution?
· Can one recover both restitution and compensation for a wrong?
· How should one deal with multiple defendants?
· How should one deal with multiple plaintiffs?
In accordance with our basic approach of leaving development of the law on restitution for wrongs to the courts, we do not recommend legislation on any of these four questions.
(1) The quantum of restitution
3.59 The starting-point in determining the quantum of restitution is to identify all the gains that the defendant has made by the wrong. This is a factual causation inquiry, which essentially requires the application of a but for test: the gain is attributable to the wrong if the defendant would not have made that gain but for the wrong. So, for example, in My Kinda Town Ltd v Soll, (92) where the defendants were alleged to be liable for passing off by using a name similar to the plaintiffs for their own chain of restaurants, the profits to be accounted for were only those additional profits caused by the publics confusion in thinking the defendants restaurants were the plaintiffs, and not all the profits made by the defendants from those restaurants. Similarly in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd, (93) an infringement of trade mark case, the profits to be accounted for were not all those gained from the sale of infringing goods but only those made because the goods were sold under the trade mark.
3.60 In some cases the factual causation enquiry will indicate that the defendant could have lawfully made the profits in question if it had paid for the property, or use of the property, from which those profits have been derived. On such facts, the measure of restitution (whether through an account of profits or restitutionary damages) should be the expense saved by the defendant in not paying for the property (or use of the property).
3.61 It is clear that in some cases the factual causation enquiry is an extremely difficult one and may ultimately lead to the conclusion that none of the alleged wrongfully acquired profits is attributable to the wrong. Take, for example, libel by a newspaper. It will often be extremely difficult to establish that particular sales of the newspaper are attributable to the particular libel.
3.62 Even if one has established that gains are factually attributable to the wrong, the courts still have a discretion to award a part, rather than the whole, of those gains. One may regard this as being analogous to the legal causation or remoteness restriction in the realm of compensation for a factually caused loss. This is most clearly illustrated by the allowance given in equity for the skill and effort expended by the defendant to make the profit, at least where the wrong has not been committed dishonestly. (94)
3.63 We do not propose to make any changes to the principles used by courts to assess the quantum of restitution. We therefore recommend that:
(10) our proposed legislation should not deal with how the quantum of restitution is determined.
(2) Can one recover both restitution and compensation for a wrong?
3.64 If compensation can be claimed for losses caused by wrongdoing, and restitution can be claimed of benefits gained as a result of wrongdoing, does this mean that plaintiffs can claim both compensation and restitution for wrongs if defendants have both caused losses and made gains by their wrongdoing?
3.65 This question has been most commonly discussed in relation to whether a plaintiff can be awarded both an account of profits and (compensatory) damages for an intellectual property tort. The law is clear: a plaintiff cannot be awarded both an account of profits and damages but must choose between them. (95) Similarly, we have seen that in United Australia Ltd v Barclays Bank Ltd (96) Viscount Simon LC considered that the plaintiff must at some stage of the proceedings elect between the remedies, for the tort in question, of restitution (in that case, the action for money had and received) and compensatory damages. Again, in Mahesan v Malaysia Government Officers Co-op Housing Society Ltd, (97) the agent of a housing society, in return for a bribe, caused the society to buy land at an overvalue. The society sued the agent for both the amount of the bribe ($122,000) and damages for the tort of deceit for the loss sustained by the society (assessed at $443,000). The Federal Court of Malaysia awarded both the amount of the bribe and the damages. On appeal, this was overturned by the Privy Council, which held that the society was bound to elect between its claims under the two heads. Since the society would obviously have elected to take damages, judgment was entered for $443,000.
3.66 Perhaps the clearest analysis of this issue is contained in the Privy Councils judgment in Tang Min Sit v Capacious Investments Ltd, (98) which concerned a breach of trust. Lord Nicholls relied on a distinction between alternative and cumulative remedies and said:
The law frequently affords an injured person more than one remedy for the wrong he has suffered. Sometimes the two remedies are alternative and inconsistent. The classic example, indeed, is (1) an account of the profits made by a defendant in breach of his fiduciary obligations and (2) damages for the loss suffered by the plaintiff by reason of the same breach. The former is measured by the wrongdoers gain, the latter by the injured partys loss ... Faced with alternative and inconsistent remedies a plaintiff must choose, or elect, between them. He cannot have both. (99)
3.67 It is therefore clear law that a plaintiff cannot be awarded both compensation and restitution for a wrong; he must elect between them. But the justification for this is far from obvious. It has been criticised by, for example, Professor Birks (100) and Professor Tettenborn. (101) In his case note on Tang Min Sit, Professor Birks says:
If a plaintiff is entitled to recover the defendants gains when he has suffered no loss at all, it is not clear why there should be any inconsistency in his asking, where he has suffered loss, that the defendant should both disgorge his own gains and make good the plaintiffs loss ... The premiss of election is inconsistency. If there is no inconsistency, there need be no election, though care must necessarily be taken against the danger of double recovery. (102)
3.68 We consider that the law reaches the right result, in that it ensures that a plaintiff cannot recover both full restitution and full compensation for a wrong. This seems the right result because to award full restitution and full compensation for a wrong would be to award a sum in excess of the minimum necessary to achieve either of the aims of compensating loss or disgorging gain. A full award of either changes the position of both defendant and plaintiff, and makes it impossible just to reverse the defendants (Ds) unjust enrichment or just to compensate the plaintiffs (Ps) losses. So, for example, if D has received a bribe of £1000 and has caused loss to P of £2,000, the effect of requiring D to pay P £3000 would be that P is neither just compensated for its loss (but instead receives a windfall of £1000) and nor is D just stripped of its unjust enrichment (but rather has an extra £2000 stripped away).
3.69 This is not to deny that a combination of compensation and restitution might be justified as a punitive measure. However, if punishment is required, that should be addressed openly and directly by considering whether the criteria for exemplary damages are satisfied, and what the appropriate quantum of exemplary damages should be. (103)
3.70 But while we consider that the present law reaches the right result, in avoiding an award of both full restitution and full compensation, we are far from convinced that the means currently chosen to achieve this - the election requirement - is satisfactory. Provided that the one takes account of the other, we agree with Professor Birks that there is no inconsistency or double recovery in allowing both restitution and compensation to be awarded. In the example above, the correct result should be that D is required to pay P £2,000. This might be justified as full compensation alone, but it could also be justified as full restitution (£1,000) plus partial compensation (£1,000).
3.71 The best that can be said of a 3.74">3.74 We would expect that a wrongdoer would personally have had to receive a benefit before an action for restitution could lie against him or her. This may already be the law, (105) and certainly we think it unlikely that the problems which have arisen in relation to exemplary damages would arise in relation to restitution. (106) For the basis of a claim to restitution is that the defendant from whom restitution is sought has been unjustly enriched - and in the area of restitution for wrongs, this ought to mean that the defendant has received a benefit from his wrong against the plaintiff.
3.75 Whether or not this view is correct, we do not think that the regime which we propose to apply to punitive damages (several liability, with exceptions for vicarious liability and partnerships) (107) can simply be applied to claims to restitutionary damages. In particular, the concept of vicarious liability may not apply to restitutionary damages. Can one say that an employee who personally receives a benefit by committing a tort in the course of employment renders his employer liable for the benefit he received? Moreover, if two tortfeasors, acting as part of a joint enterprise, make a gain of £1,000 from a single tort, it is not obvious what several liability would entail. Should they each be liable to pay £500 or £1,000?
3.76 For these reasons, as well as the considerations that this area of the law is largely unexplored, that the issue was not raised with consultees, and that a solution in this area would have to be evolved for all claims to restitution for wrongs (and not just those under our Act), we consider that this issue is one best left for future courts to resolve, for all instances of restitution for wrongs. We recommend that:
(12) our proposed legislation should not deal specifically with the problems raised by claims to restitution for wrongs committed by two or more defendants against one plaintiff (multiple defendant cases).
(4) Multiple plaintiffs
3.77 The same conduct or course of conduct of one person may constitute a separate wrong to two or more others. If the wrongdoer has obtained a benefit by committing those wrongs, and more than one person can establish an entitlement to restitution in respect of them, it is not easy to determine what their individual entitlements to restitution should be. Say, for example, a defendant has made gains by allowing its factory to discharge noxious fumes constituting the tort of private nuisance to a large number of plaintiffs. Or say the defendant publishes an article which makes defamatory remarks about a group of people. This problem does not yet appear to have arisen in relation to restitutionary awards for wrongs.
3.78 It shall be seen in Part V that we do consider that special legislative provision is required to deal with multiple claims to exemplary damages. (108) But for several reasons we consider that the problem of multiple claims to restitution for wrongs is one that is best left for the courts to resolve.
3.79 First, for reasons of coherence, any legislative provision for multiple plaintiff cases ought to apply to all claims to restitution for wrongs - that is, to claims under the statute which we propose, as well as to claims arising outside of the statute. Since we consider that such a legislative change would go too far, the only coherent alternative is to leave multiple plaintiff problems to be resolved for all claims to restitution for wrongs by the courts. The minimalist approach to statutory intrusion in the developing common law on restitution for wrongs which we propose - legislative reform only so far as is necessarily required by reform of the law of exemplary damages - does not require us to go any further.
3.80 Secondly, we believe that multiple plaintiff claims to restitutionary damages do not produce the same difficulties as those which justify special provision for multiple plaintiff claims to punitive damages. In particular, the law of restitution for wrongs should, as it already stands, have an in-built limitation on the number of actions in which restitution may be awarded in respect of the gains made by a defendant from a particular course of conduct. The defendants liability to restitution for a wrong or wrongs must be limited to the benefits which the defendant obtained as a result of the wrong or wrongs; accordingly, if the defendant is made liable to restitution to the full extent of those benefits in one action, there should be no question of any later claim to restitution in respect of some or all of those benefits being permissible. Contrast the law of exemplary damages. It is precisely because there is no such in-built limitation, and as a result a risk of excessive punishment, that we have found it necessary to impose the first past the post takes all restriction. (109) For the reason just given, there should be no analogous risk of excessive restitution - that is, of a liability to restitution which exceeds the value of the benefits derived from the wrong.
3.81 To the extent that multiple plaintiff claims to restitution do raise other issues (such as how a restitutionary damages award should be divided amongst multiple claimants), we believe that these are issues which should be capable of practical solution by the courts, or by the relevant procedural rule-making bodies, for all instances of restitution for wrongs, if and when they arise. We therefore recommend that:
(13) our proposed legislation should not deal specifically with the problems raised by claims to restitution for wrongs by two or more plaintiffs from one defendant (multiple plaintiff cases).
5. A NOTE ON TERMINOLOGY
3.82 One of the most needlessly confusing aspects of the law of restitution is the host of differently labelled remedies that are concerned to effect restitution. Even if we confine ourselves to restitution for wrongs (that is, unjust enrichment by wrongdoing) we have seen that an action for money had and received, an account of profits, and restitutionary damages (where the damages are assessed according to the gains made by the defendant rather than the loss of the plaintiff), are all concerned to effect restitution. (110) Moreover, all three of those remedies are personal, and not proprietary, remedies. We think that much would be gained in terms of simplifying the law, and nothing would be lost, if one replaced those three separately labelled remedies by a single remedy. Although this must be a matter for the judges, perhaps with guidance from a Practice Direction, and could not sensibly be imposed by legislation, we recommend that:
(14) in the context of restitution for wrongs, it would be appropriate for judges - and so practitioners - to abandon the labels action for money had and received and account of profits in favour of the single term restitutionary damages (or at a higher level of generality, restitutionary award or restitution).~(111)~
3.83 Two substantive advantages would flow from this simplification of terminology. First, the new label would be seen as fusing common law and equitable remedies and would therefore remove the historically-based and wholly arid discussion as to whether an account of profits (as an equitable remedy) can be awarded for a common law cause of action or whether damages (as a common law remedy) can be awarded for an equitable cause of action. The newly-labelled remedy would be available for common law and equitable wrongs alike. Secondly, it has traditionally been thought that an account of profits requires a very precise calculation of the relevant profits, with an actual account having to be drawn up, showing gains and losses, (112) whereas it has been accepted that often damages can be calculated in a rough and ready manner. In fact in recent years some judges have accepted that an account of profits need not be any more precisely calculated than damages. (113) This is to be welcomed but a replacement of the label account of profits would be even better in severing the link with the needless and historically-based requirement of precision in calculation.
3.84 Some may consider that there are insuperable problems in abandoning long-accepted remedial labels. For example, it may be argued that an action for money had and received and an account of profits are debt actions or liquidated claims, whereas restitutionary damages implies an unliquidated claim. But any distinctions that do turn on whether a claim is for a debt or liquidated claim, or an unliquidated claim, are either irrational in the context of restitution for wrongs, or could equally well be applied to restitutionary damages depending on whether the damages are for a certain sum or require assessment by the courts. More problematically it may be thought that the term restitutionary damages means that the courts would lose the general discretion that they have to refuse to award the equitable remedy of an account of profits - for example, on the grounds of the plaintiffs unclean hands or hardship to the defendant. While we accept that there are difficulties here, we do not regard them as insuperable. Equitable remedies share with common law remedies that they are awarded, or refused, in accordance with well-established rules and principles. Moreover, there are common law doctrines - such as those of illegality or public policy - which mirror in nature, if not in scope, the so-called discretionary defences in equity. It may therefore be that a move to the single label restitutionary damages would not involve any significant loss of judicial discretion to refuse the remedy.
(1)[1991] 2 AC 548. For further acceptance and application of the principle against unjust enrichment by the House of Lords, see Woolwich Equitable Building Society v IRC [1993] AC 70; Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669.
(2) See P Birks, An Introduction to the Law of Restitution (revised ed, 1989) pp 23-24, 40-44, 313-315, 346-355; A Burrows, The Law of Restitution (1993) pp 16-21, 376. For judicial recognition of this division, see Halifax Building Society v Thomas [1996] 2 WLR 63 and Commissioner of State Revenue (Victoria) v Royal Insurance Australia Ltd (1994) 182 CLR 51, per Mason CJ. See also the central division in Lord Goff of Chieveley and G Jones, The Law of Restitution (4th ed, 1993) between "Section One: Where the Defendant has Acquired a Benefit from or by the Act of the Plaintiff" and "Section Three: Where the Defendant has Acquired a Benefit through his own Wrongful Act". J Beatson, The Use and Abuse of Unjust Enrichment (1991) pp 206-243 is not convinced of the validity of the Birksian divide; nor is P Cane, "Exceptional Measures of Damages", in P Birks (ed), Wrongs and Remedies in the Twenty-First Century (1996) pp 312-323.
(3) For discussions of this area see, eg, Lord Goff of Chieveley and G Jones, The Law of Restitution (4th ed, 1993) chs 33, 36, 38, and pp 414-417; P Birks, An Introduction to the Law of Restitution (revised ed, 1989) pp 39-44, ch 10; A Burrows, The Law of Restitution (1993) ch 14; A Burrows, Remedies for Torts and Breach of Contract (2nd ed, 1994) ch 6; J Beatson, The Use and Abuse of Unjust Enrichment (1991) pp 206-243; I Jackman, "Restitution for Wrongs" (1989) 48 CLJ 302; P Birks, Civil Wrongs: A New World (Butterworth Lectures 1990-91) pp 94-98.
(4) That is, the damages can be viewed as compensating the plaintiffs loss of opportunity to bargain. See R J Sharpe and S M Waddams, "Damages for Lost Opportunity to Bargain" (1982) 2 OJLS 290. For differing judicial views as to the usefulness of the notion of loss of opportunity to bargain, see the interpretations of Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 by Steyn LJ in Surrey CC v Bredero Homes Ltd [1993] 1 WLR 1361 and by the Court of Appeal in Jaggard v Sawyer [1995] 1 WLR 269. See para 3.36 below.
(5) [1941] AC 1.
(6) That is, the action for money had and received.
(7) [1941] AC 1, 18-19.
(8) For a rare example of this, see Verschures Creameries Ltd v Hull and Netherlands SS Co Ltd [1921] 2 KB 608.
(9) See para 3.23 below.
(10)Lamine v Dorrell (1705) 2 Ld Raym 1216, 92 ER 303; Chesworth v Farrar [1967] 1 QB 407.
(11)Oughton v Seppings (1830) 1 B & Ad 241, 109 ER 776; Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246, 254-255, per Denning LJ (cf Somervell and Romer LJJ, who analysed the award as compensatory).
(12)Powell v Rees (1837) 7 Ad & E 426, 112 ER 530; Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyds Rep 359; Bracewell v Appleby [1975] Ch 408; Ministry of Defence v Ashman (1993) 66 P & CR 195.
(13)Carr-Saunders v Dick McNeill Associates Ltd [1986] 1 WLR 922 (although, as there was no evidence of profit, no award was made).
(14) See, eg, Jones v Miah (1992) 24 HLR 578, 587.
(15) (1993) 66 P & CR 195. Ashman was followed and applied by the Court of Appeal in Ministry of Defence v Thompson [1993] 2 EGLR 107. See generally, E Cooke, "Trespass, Mesne Profits and Restitution" (1994) 110 LQR 420.
(16) (1993) 66 P & CR 195, 200-201.
(18) S Hedley, "Unjust Enrichment as the Basis of Restitution - An Overworked Concept" (1985) 5 Legal Studies 56, 64; W Gummow in PD Finn (ed), Essays on Restitution (1990) pp 60-67.
(19) P Birks, An Introduction of the Law of Restitution (revised ed, 1989) p 323.
(20) Lord Goff of Chieveley and G Jones, The Law of Restitution (4th ed, 1993) p 719; A Burrows, The Law of Restitution (1993) p 391.
(21) See, eg, Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyds Rep 359; Bracewell v Appleby [1975] Ch 408; Ministry of Defence v Ashman (1993) 66 P & CR 195.
(22)But Phillips v Homfray (1883) 24 ChD 439 was applied in AG v De Keysers Royal Hotel [1920] AC 508. See also Morris v Tarrant [1971] 2 QB 143.
(23) [1988] 1 WLR 1406.
(24) [1988] 1 WLR 1406, 1415.
(25) See, eg, P Birks, Civil Wrongs - A New World (Butterworth Lectures 1990-91) esp pp 57-77; A Burrows, The Law of Restitution (1993) pp 392-393; Lord Goff of Chieveley and G Jones, The Law of Restitution (4th ed, 1993) pp 722-723.
(26) Lever v Goodwin (1887) 36 ChD 1; My Kinda Town Ltd v Soll [1982] FSR 147, reversed on liability [1983] RPC 407.
(27) Edelsten v Edelsten (1863) 1 De G J & S 185, 46 ER 72; Slazenger & Sons v Spalding & Bros [1910] 1 Ch 257; Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 (HCA).
(28) See especially the decision of Windeyer J in the High Court of Australia in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25.
(29) Gillette UK Ltd v Edenwest Ltd [1994] RPC 279.
(30) [1982] FSR 147, reversed on liability [1983] RPC 407.
(31) [1982] FSR 147, 156. See also Potton Ltd v Yorkclose Ltd [1990] FSR 11 (infringement of copyright).
(32) (1968) 122 CLR 25 (HCA).
(33) (1968) 122 CLR 25, 32, 34-35.
(34) Patents Act 1977, s 61(1)(d)
(35) Copyright, Designs and Patents Act 1988, s 96(2).
(36) Copyright, Designs and Patents Act 1988, s 229(2).
(37) Copyright, Designs and Patents Act 1988, s 191I(2).
(38) Patents Act 1977, s 62(1). The same approach applies to damages.
(39) Copyright, Designs and Patents Act 1988, s 97(1). A different approach applies to damages.
(40) Copyright, Designs and Patents Act 1988, s 233(1). A different approach applies to damages.
(41) Copyright, Designs and Patents Act 1988, s 191J(1). A different approach applies to damages.
(42) See para 3.13 above.
(43) On deceit see, for example, Hill v Perrott (1810) 3 Taunt 274, 128 ER 109; Billing v Ries (1841) Car & M 26, 174 ER 392; Kettlewell v Refuge Assurance Co [1908] 1 KB 545, affirmed [1909] AC 243. On intimidation see, for example, Astley v Reynolds (1731) 2 Str 915, 93 ER 939; Universe Tankships Inc of Monrovia v ITWF [1983] 1 AC 366. On inducing breach of contract see, for example, Lightly v Clouston (1808) 1 Taunt 112, 127 ER 774; Foster v Stewart (1814) 3 M & S 191, 105 ER 582.
(44) See para 3.7 above.
(46) [1996] Ch 217, 227G-H.
(47) See the discussion of the categories test formulated in Rookes v Barnard [1964] AC 1129, and especially of category 2, paras 4.3 and 4.9-4.20 below.
(49) [1972] AC 1027, 1130C-D.
(51) Eg Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378, [1967] 2 AC 134; Boardman v Phipps [1967] 2 AC 46.
(52) Eg Reading v AG [1951] AC 507.
(53) [1964] 1 WLR 96.
(55) [1990] 1 AC 109, 286B-E.
(56) [1967] 1 WLR 923. See also Seager v Copydex Ltd (No 2) [1969] 1 WLR 809. The other explanation is that the court awarded damages, rather than an account of profits because, as a matter of factual causation, the contribution of the confidential information to the profits made was relatively minor.
(57) [1967] 1 WLR 923, 932A.
(59) [1994] 1 AC 324. See also AG v Blake [1996] 3 WLR 741, 750C-G (breach of confidence); LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 (breach of confidence).
(61) See A Burrows, The Law of Restitution (1993) pp 397-398; P Birks, An Introduction to the Law of Restitution (revised ed, 1989) p 334; P Birks, "Restitution and the Freedom of Contract" (1983) 36 CLP 141, 149-159.
(62) Tito v Waddell (No 2) [1977] Ch 106, 332E.
(63)[1993] 1 WLR 1361. For notes or articles on this case see, eg, ODair [1993] RLR 31; Birks (1993) 109 LQR 518; Burrows [1993] LMCLQ 453; Smith (1994) JCL 164.
(64)[1974] 1 WLR 798.
(65)[1974] 1 WLR 798, 812H.
(66)[1974] 1 WLR 798, 815D.
(67) [1971] 1 WLR 798, 815.
(68)[1993] 1 WLR 1361, 1369G.
(70) See para 4.28 below.
(71) See, eg, Reid-Newfoundland Co v Anglo-American Telegraph Co Ltd [1912] AC 555; Lake v Bayliss [1974] 1 WLR 1073; Hospital Products Ltd v United States Surgical Corpn (1984) 156 CLR 41.
(72) See generally Part V below.
(73) Aggravated, Exemplary and Restitutionary Damages (1993) Consultation Paper No 132, para 7.10.
(74) 69% of those responding on this question favoured leaving development of restitutionary damages to the courts.
(75) See para 3.41 above.
(76) For a general survey, see A Burrows, The Law of Restitution (1993) pp 401-403.
(77) "Restitutionary Damages for Breach of Contract" [1987] LMCLQ 421.
(78) The Law of Restitution (1990) pp 432-438.
(79) See also J Beatson, The Use and Abuse of Unjust Enrichment (1991) pp 15-17; S M Waddams, "Restitution as Part of Contract Law", in A Burrows (ed), Essays on the Law of Restitution (1991) pp 208-212.
(80) Aggravated, Exemplary and Restitutionary Damages (1993) Consultation Paper No 132, para 7.18.
(81) See para 3.41 above.
(82) See recommendation (19)(a) and paras 5.49-5.56 below.
(83) Defined as breach of fiduciary duty, breach of confidence and procuring or assisting breach of statutory duty. See recommendation (19)(a) and para 5.56 below.
(84) Defined as any wrong which arises under an Act, for which a person may recover compensation or damages, provided that the availability of punitive damages would be consistent with the policy of the Act under which the wrong arises. See recommendation (19)(b) and paras 5.57-5.65 below.
(85) See recommendation (18) and paras 5.46-5.48 below.
(86) See recommendation (19) and paras 5.71-5.73 below.
(87) There is one theoretically possible difference. Where restitutionary damages are being considered for a civil wrong which arises under a statute (which we define in clause 12(2) of the draft Bill), the court may only award them if an award of restitutionary damages would be consistent with the policy of the statute in question: recommendation (7)(a)(ii) above. Where punitive damages are being considered for a civil wrong which arises under a statute, the court may only award them if an award of punitive damages would be consistent with the policy of the statute in question: recommendation (19)(b) below. It is theoretically possible (but almost inconceivable in practice) that a statute could be held to be consistent with an award of punitive damages, but not restitutionary damages (in the same circumstances).
(88) See paras 5.49-5.56 below (punitive damages available for any tort or certain equitable wrongs); paras 5.57-5.65 below (punitive damages available for statutory civil wrongs, but only where an award of punitive damages would be consistent with the policy of the Act under which the wrong arises); paras 5.46-5.48 below (deliberate and outrageous disregard of the plaintiffs rights).
(89) See para 3.13 above.
(90) See paras 3.19-3.22 above.
(91) See paras 3.28-3.29 above.
(92) [1982] FSR 147, reversed on liability [1983] RPC 407.
(93) (1968) 122 CLR 25.
(94) See, eg, Boardman v Phipps [1967] 2 AC 46; Redwood Music Ltd v Chappell & Co Ltd [1982] RPC 109, 132. Cf Guinness plc v Saunders [1990] 2 AC 663.
(95) Neilson v Betts (1871) LR 5 HL 1; De Vitre v Betts (1873) LR 6 HL 319; Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25; Island Records Ltd v Tring International plc [1996] 1 WLR 1256. Section 61(2) of the Patents Act 1977 reads: "The court shall not, in respect of the same infringement, both award the proprietor of a patent damages and order that he shall be given an account of the profits".
(96) [1941] AC 1, 18-19. See the citation at para 3.6 above. See similarly the citation at para 3.12 above from Ministry of Defence v Ashman (1993) 66 P & CR 195, 200-201.
(97) [1979] AC 374.
(99) [1996] AC 514, 521B-D.
(100) (1996) 112 LQR 375.
(101) (1979) 95 LQR 68.
(102) (1996) 112 LQR 375, 378.
(103) These are matters which we discuss at length in Part V.
(104) The defendants may have committed, in law, separate wrongs by their independent acts, or, in law, a joint wrong.
(105) But we are aware that the law on agents receiving unjust enrichments may make the principal liable, even if he has not personally gained thereby. See, for example, A Burrows, The Law of Restitution (1993) pp 478-486.
(106) These have, in particular, arisen from efforts to constrain the otherwise problematic effects of the laws recognition of joint or joint and several liability to exemplary damages. See paras 4.77-4.80 and paras 5.186-5.191, below.
(107) See, in particular, paras 5.192-5.208 and 5.209-5.230, and recommendations (34)-(40) below.
(108) See paras 5.159-5.185 below.
(109) See, in particular, paras 5.161-5.167, and more generally, paras 5.159-5.185, below.
(110) See paras 3.3, 3.5-3.32 above.
(111) It will be apparent that we do not agree with Millett LJs comment in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1996] Ch 286, 306D that the term restitutionary damages is a misnomer.
(112) See, eg, Prices Patent Candle Co Ltd v Bauwens Patent Candle Co Ltd (1858) 4 K & J 727.
(113) See, eg, My Kinda Town Ltd v Soll [1982] FSR 147, 159; Potton Ltd v Yorkclose Ltd [1990] FSR 11.