Defences

Question 1

Goudkamp and Mitchell

Answer 1

rules that define the elements of an action in unjust enrichment (rejection of an element being made out is a denial) vs rules that specify situations in which liability will not arise or will not arise in full (a defence)

Question 2

denials/bars

Answer 2

1. enrichment conferred pursuant to an enforceable obligation (contract, statutory obligation)
2. enrichment conferred pursuant to a natural obligation
3. enrichment conferred as a gift
4. risk taking
5. res judicata

Question 3

natural obligation bar

Answer 3

supported by Sheehan and Birks

argued against by Tang - natural obligation bar shouldnt be introduced but two specific defences should be - money paid purusant to a time barred debt and money paid in relation to a gambling loss

Question 4

what is passing on

Answer 4

C has made to a payment to D pursuant to an unjust factor but then recoups the loss from someone else and the loss is borne by third party. if recognised, claimant should not be entitled to bring a claim in UE because enrichment was not at the claimant’s expense.

Question 5

recognition of passing on

Answer 5

Air Canada (SCC) OBITER 
3 airlines who had paid fuel tax to the state under a statute later declared unconstitutional then retrospectively tax validated.. if tax hadnt been validated, there would be no claim because the airlines had passed on their loss to the passengers. justifiation was that it was preferable to leave the enrichment with the tax authority than use judicial machinery to shift enrichment to tax payer.

Marks and Spencer v Commissioners of Customs and Excise
Lord Walker recognised passing on as a possible defence to a restitutionary claim, but did so in reliance on Roxborough which rejected passing on so not a good authority.

Question 6

Rejection of passing on

Answer 6

Aus: Mason v New South Wales, Roxborough

England: Kleinwort Benson v South Tyneside; Kleinwort Benson v Birmingham CC

Canada: Kingstreet

My Kind Kitchen Rules

Question 7

Woolwich and passing on

Answer 7

Goff declined to say whether or not passing on should be adopted so at the highest level there is uncertainty

Question 8

academics and passing on

Answer 8

TGVRB 
Trotter
Goff and Jones
Virgo
Rush
Burrows

Question 9

Burrows on passing on

Answer 9

o Reasons FOR - the “at the claimant’s expense” requirement means that the gain to the defendant needs to have been subtracted from the claimant. To reverse the unjust enrichment would leave the claimant better off, so the claimant would be unjustly enriched.
o Reasons AGAINST - “at the expense of” does not require a loss to the claimant, it is sufficient if there has been a transfer of value (no longer a good point following ITC), too simplistic to say that the claimant has had a windfall as the claimant may be liable to the third party for unjust enrichment
o Views the best way forward as rejecting passing on but recognising that the claimant may have to provide restitution to the third party

Question 10

Goff and Jones on passing on

Answer 10

o The view that the claimant’s loss is zero because it has passed it on some time after the claimant transferred the benefit is “inconsistent with the rule that a cause of action in unjust enrichment generally accrues at the time when the defendant is enriched.” (treating passing on as a denial)
o Alternatively it is a defence, where a gain is left with the defendant because neither party deserves it so it is left where it falls. It is not transferred back to the claimant because the claimant would then be unjustly enriched at the third party’s expense.
o Allowing the passing on defence would prevent the law from reaching the best corrective result because the benefit would remain in the defendant’s hands but if it went back to the claimant, the claimant must account for it. Alternatively the third party may have meant the claimant to be enriched in all events, in which case passing on would produce the wrong result as between the claimant and third party.

Question 11

Virgo on passing on

Answer 11

o Defence would be consistent with the correspondence principle, but correspondence principle does not require its recognition.
o But in reality it will be hard to prove
o Inconsistent with the normative basis for recognising restitutionary liability - concerned with relationship between claimant and defendant.

Question 12

Rush on passing on

Answer 12

o More compelling reasons for rejection are
“ Things done or transactions undertaken between others ought not to effect or prejudice non-parties
“ Claims for restitution are concerned with reversing the direct consequences of a defective transfer. Passing on is not an exception to this. Transactions with third parties do not affect the normative quality of any defective transfer that has taken place between claimant and defendant.
“ If passing on is recognised the ideal corrective justice solution will not be attained because the third party can’t leapfrog the claimant to bring a claim against the defendant. If passing on were recognised, the third party wouldn’t be able to claim against the original claimant because it would be able to invoke disenrichment, as he will no longer be in possession of the unjust enrichment. Ways to deal with this would be:
“ Court making an award in favour of a third party (during an action between claimant and defendant) as in Pourier (d/b/a Muddy Creek Oil and Gas Inc v South Dakota Dept Revenue) - but issues of procedural fairness
“ Court could make an indirect award in favour of a third party e.g. claimant is awarded restitution on condition of passing back (avoiding issues of procedural fairness)
“ Constructive trust e.g. 123 East Fifty Fourth Street Inc v US (but priority problems with winding up)
“ Personal obligation to third party (but issue with finality of litigation, and claimant may refuse to participate)
“ Unconditional restitution in favour of claimant - third party can bring a claim. Third party will have incentive to do so, avoiding issues of constructive trust and leapfrogging. This is the best way to achieve corrective justice.

Question 13

Trotter on passing on

Answer 13

o Recognition of correspondence principle requires recognition of passing on.
o The cases where the defence have been rejected can be explained in other terms e.g. cases concerning ultra vires taxation can be explained on basis of principle that public body should not be able to keep the tax, or denial of passing on or factual or evidential grounds rather than legal.
o Rationale for passing on reflects that of change of position - “change of position ensures that unjust enrichment does not strip gains from the innocent defendant that she does not ultimately have; passing on ensures it does not restore to the claimant wealth that he has not ultimately lost.”
o Passing on has been recognised in competition law

Question 14

recognition of change of position

Answer 14

Lipkin Gorman

Question 15

COP discretion

Answer 15

Lipkin Gorman - where a claim is denied it is denied on the basis of legal principle

Question 16

rationales for COP

Answer 16

achieving a just and equitable outcome: Lipkin Gorman - suggests the defence is about measuring injustices and choosing the least unjust option.

disenrichment - Burrows and Birks

Question 17

Elements for COP

Answer 17

causative link between D’s receipt and change of position

D has detrimentally changed position

absence of bad faith or wrongdoing

Question 18

COP wide view and narrow view

Answer 18

narrow view is that the D has to have acted postively in reliance on the receipt of the enrichment

wide view is that the D need only have suffered a loss which he would not have suffered but for the receipt so passive changes count

Question 19

COP support for wide view

Answer 19

Scottish Equitable v Derby
Cressman v Coys of Kensington
Abou-Rahmah
Commerzbank

Can Shelby Always Cuddle

Question 20

anticipatory COP

Answer 20

Dextra Bank PC recognised possibility of anticipatory COP

Commerzbank CA agreed with Dextra that anticipatory COP is a perfectly good defence to restitutionary claim

Question 21

John Ruskin College v Harley

Answer 21

Money held in court paid out to defendant by mistake when it was meant to be paid to the claimant. Defendant permitted to rely on COP in respect of certain expenditures made in anticipation of receiving.

Question 22

justifications for anticipatory COP

Answer 22

Ratan - baseline for assessment of COP is that the D must not be wrose off by making restitution than if the claimant’s decision making had not been defective. captures both post receipt and pre receipt detriment.

the view that the base line is the point of receipt, which operates to ensure that the defendant is nbot worse off than would have been if had not received the enrichment would make ACOP inappropriate

Question 23

position on whether the COP must be pecuniary or disenriching

Answer 23

starting point is that there will have been a detrimental change of position if the defendant entered a transaction that he would not have entered but for his enrichment.

unclear whether lost opportunities can amount to detriment. Scottish Equitable obiter that def giving up employment at an age where it wouldnt be easy to get alternative employment could count as COP.

Commerzbank obiter that in principle the decision to stay in a job because of receipt of a bonus could be relevant COP, or a decision to divorce.

Australian Financial Services (HCA) held that the defence operated completed with o need to value the detriment. the detrimental reliance was use of mistakenly transferred funds to discharge debts of a customer, ceasing to pursue repayment from the customer, and continuing to trade with the customer. VIRGO thinks no reason that Enbglish law would reach a different result.

Question 24

French CJ in Australian Financial Services

Answer 24

COP operates pro tanto where the detriment can be quantified, but it applies as a complete defence when it cannot be.

This is the position argued for by BANT

Question 25

COP what is bad faith

Answer 25

knowledge (Cressman)
awareness of a risk of not being entitled to the enrichment (South Tyneside, Weber)

NOT negligence (Dextra Bankk, Jeremy Stone)

Question 26

if a person knows all the facts which would give rise to a claim but subjectively does not appreciate there is a claim, is that negligence or bad faith? COP

Answer 26

law is unclear

Armstrong: bad faith can include failure to act in a commercially acceptable way and good faith may require making enquiries when the defendant has good reason to believe that the payment was made by mistake

Majedski - obiter, suggests objective test

Hampton Capital - suggests subjective test

if we think about principle, the level of fault barring a def from relying on the defence should mirror the level of fault that allows a claimant to recover

Question 27

bad faith must relate to the payment in question COP

Answer 27

Abou-Rahmah

Question 28

wrongdoing COP

Answer 28

unclear what this means

possibly an illegal act - Barros Mattos, O’Neil v Gale, Patel v Mirza

Question 29

releative fault of the parties COP

Answer 29

irrelevant: Dextra Bank

Question 30

COP proving defence

Answer 30

burden on def: FII
stringent in requiring proof of cuasation, but once that is proved, flexible approach to quantifiation: Scottish Equitable, Phillip Collins

Question 31

COP is not a defence to Woolwich

Answer 31

FII
on basis of stultification principlle - to allow the defence would unacceptably subvert and be inconsistent with the principle which led to the Woolwich ground of recovery

Question 32

COP is a defence to mistake

Answer 32

FII

Question 33

COP charity

Answer 33

FII hypothetical example of a charity receiving a mistaken payment and then causally spending on a charitable purpose that it wouldnt have otherwise spent mobney on, counts as COP even though doing something you enjoy with your money

Question 34

COP thibngs you enjoy

Answer 34

holiday that you would not have spent money on counts: Lipkin Gorman

Question 35

COP paying off mortgage

Answer 35

Scottish Equitable - not a detriment to pay off a debt which would have to be paid off sooner or later, but might be if it ws on a long term loan with favourable terms

also Hill Street - no COP where paying off debt that D always intended to repay

Question 36

COP improvements to lifestyle

Answer 36

counts: Phill Collins, Scottish Equitable

Question 37

COP might not have defence if it is easy enough to litigate and get money back

Answer 37

FII

Question 38

estoppel classification

Answer 38

G&J say it is a denial rather than a defence, because the point is to prevent C from leading evidence to show that D’s enrihcment was unjust.

Question 39

elements of estoppel

Answer 39

Jiwani
defendant must have been led to believe that he is entitled to the benefit
the defendant has relied on that promise
reliance results in a detrimental change of d’s position so that it would be inequitable to require him to repay

Question 40

consequences of estoppel

Answer 40

Avon v Howlett
rule of evidence operating to the full amount of the enrichment. but prepared to recognise that exceptionally it could operate pro tanto.

Question 41

estoppel and COP

Answer 41

per Phillip Collins and National Westminster Bank, estoppel is a complete defence unless it is unconscionable for that to be the position. difficulty with this is working out when it will be unconscionable.

Burrows would get rid of estoppel in this context, because the unconscionability exception in effecrt swallows up the all or nothing rule because the courts can always be expected to find that it would be unconscionabvle for D to keep windfall. Virgo acknowledges that estoppel is likely to cease to have any function in restitution.

Goff and Jones and Hudson say that estoppel has a separate role to play, it has the extra element of representation and is about holding claimant to undertakings and respecting defendant’s decision making autonomy.