668 DAMAGES
SOLICITORS JOURNAL 17 JULY 1998
CPD: MISCELLANEOUS
Restitutionary damages
Andrew Petersen analyses the implications for
practitioners of the Law Commission's draft Damages Bill
O
N the same day (16 December
1997) that the Law Commission
published their 247th Report on
aggravated damages, punitive damages
and certain other damages, including restitutionary damages, the Court of Appeal
handed down the judgment in Attorney
General v Blake [1998] 1 All ER 833.
There, Lord Woolf MR, with Millett and
Mummery LJJ agreeing, stated (albeit tentatively and obiter) there were at least two
situations in which justice required the
award of restitutionary damages where
compensatory damages would be inadequate. The first is the case of skimped performance, when the defendant fails to
provide the full extent of the services
which he has contracted to provide and for
which he has charged the plaintiff. The
second is where the defendant has
obtained his profit by doing the very thing
which he contracted not to do. These judicial pronouncements were based on the
enlightened recognition that 'if the court is
unable to award restitutionary damages for
breach of contract, then the law of contract
is seriously defective'.
The same enlightened attitude affects
the Law Commission Report. The Draft
Damages Bill deals mainly with aggravated and punitive damages. However, by
analysing the Commission's recommendations in relation to unjust enrichment by
wrongdoing (that is, restitution for
wrongs) certain assertions can be made as
to the situation should the Bill be passed.
This area of law can be of vital importance
to practitioners advising their clients.
Restitution for wrongs
The subject of restitution based on the
principle against unjust enrichment may
now be truly seen to be coming of age,
along with an early prediction by a leading
commentator that restitution may be seen
as one of the three branches of law of
obligations (see AS Burrows (1983) 99
LQR 217). The Report, which is essentially concerned with restitution for
wrongs, is engaged in a process of developing the comparatively recent recognition
that there are certain circumstances when a
plaintiff is entitled, or ought to be entitled,
to a stripping of the gains made by a civil
wrong.
This is because the law of restitution for
wrongs has arose based on the foundation
of the general law of civil liability. The
law determines the circumstances in which
a plaintiff is entitled to restitution as a
remedy following the commission of a
wrong by the defendant to the plaintiff.
The Report, in recognising that 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
(see para 3.1), sets out a view based on
legislative reform required by their proposals on punitive damages. The court
may now decide - and so practitioners
should question - when a defendant can be
required to give up a gain made at the
expense of the plaintiff (who does not
need to have suffered loss or injury) rather
than compensating him.
implications for practitioners
Based on the recommendations and
views set out in the Report, and the law
following Blake, the following assertions
may be made.
1. There is recovery based on unjust
enrichment by wrongdoing and restitutionary damages are damages designed to
remove benefits as a result of civil wrongdoings, seed 15(6).
2. Restitutionary damages are 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, see clause 12(2).
3. Notwithstanding 2 above, the precise
scope of wrongs for which restitution will
be awarded is not settled and the judge
retains complete power to award and to
develop a framework based on restitutionary damages in other cases, see clause
12(5). Thus Blake is a timely example with
recovery allowed at least in the above situations.
4. Judicial development in this area is to
be encouraged and judges should attempt
to develop a single, restitutionary remedy
for wrongs, see Report, paras 3.82 - 3.84.
5. With regard to 4 above, it would be
appropriate for judges - and so practitioners - to abandon the labels for money had
and received and account of profits in
favour of the single term restitutionary
damages. The newly-labelled remedy
would be available for common law and
equitable wrongs alike.
6. Practitioners should investigate whether
restitutionary damages can be claimed in
all cases where exemplary (punitive) and
compensatory damages could be awarded,
see els 12(l)-(3) and (5), and the nonexhaustive pronouncements in Blake,.
7. The judge alone decides whether to
award punitive or restitutionary damages
claimed in the same action, see cl 12(4).
8. Plaintiffs can recover both compensation and restitution for a wrong if defendants have both caused losses and made
gains by their wrongdoing providing that
the one award takes account of the other.
9. Claims by multiple plaintiffs and claims
against multiple defendants are to be dealt
with by the judiciary, if and when they
arise.
Comment
Lord Diplock in Cassell and Co Ltd v
Broome [1972] AC 1027 at 1129 described
punitive damages as a blunt instrument
against unjust enrichment. In examining
restitution for wrongs, the Commission has
answered the question set by Professor
Birks, (P Birks, 'Civil Wrongs: A New
World' (Butterworth Lectures 1990-1) of
whether both the blunt instrument of
exemplary damages and the sharp instrument of restitutionary damages need to be
kept in play. Since the Report clearly
favours keeping both, the development of
the law (and restitution) can continue and
will be, in Birks' view 'best fostered if
restitutionary damages and punitive damages are allowed to work in tandem, the
former taking the profits, the latter punishing the malice'.
In the past it has been claimed that the
majority of practitioners have not heard of
restitutionary damages, whilst Millet LJ in
Co-operative Insurance Society Ltd v
Argyll Stores (Holdings) Ltd [1996] Ch
286 at 306D described the term restitutionary damages as a misnomer. Neither of
these views can, with respect, be justified.
Recognising that there is much to gain in
simplifying the law, and nothing to lose,
the Commission in clarifying the area of
the law relating to the availability of restitutionary damages for wrongs (and also
aggravated and punitive damages) have
undertaken an admirable exercise and one
which, it is strongly hoped, will be recognised and passed quickly into law. Coupled with the latest pronouncement by the
Court of Appeal in Blake, that restitutionary damages are available directly for
breach of contract, practitioners can look
to the future and a new Damages Act with
excited anticipation •
Andrew Petersen, Somerville College,
Oxford. From October pupil at 9 Gough
Square, London