(1) Restitution for wrongs
In this book we are concerned with only a part of the law of restitution, namely restitutionary remedies—that is, remedies reversing gains—for a tort or breach of contract (or, in chapter 26, for an equitable wrong). We are, in other words, concerned with restitution for wrongs and not restitution of an unjust enrichment.1
Where the restitution is not based on a wrong, the claimant seeking restitution must establish that the defendant has been unjustly enriched ‘at the claimant’s expense’ (and ‘at the claimant’s expense’ means that there must have been a transfer of value from the claimant to the defendant). The claimant’s payment of money, or rendering of services, to the defendant by mistake or under duress, or subject to a condition being fulfilled that has not been, are examples of the general cause of action of unjust enrichment which, subject to defences, will trigger restitution. But where there has been a wrongful enrichment, the law of restitution is concerned with the wrong as the cause of action not unjust enrichment. Hence the central distinction drawn in the law of restitution between restitution for wrongs and restitution of an unjust enrichment. In this chapter, we are solely concerned with restitution for wrongs where the wrong is a tort or breach of contract.2
(p. 336) As will become apparent, the main restitutionary remedies in issue in this chapter are an award of money in an action for money had and received and an account of profits.3 In the light of Morris-Garner v One Step (Support) Ltd,4 and contrary to the approach taken in previous editions of this book, ‘negotiating damages’ now find no place in this chapter. Although in the past it has been argued, both by commentators and judges, that awards of ‘negotiating damages’ (previously referred to as ‘Wrotham Park damages’ and including damages based on the ‘user principle’) were often restitutionary as being concerned to strip a proportion of profits made by the wrongdoer, that restitutionary analysis has been rejected by the Supreme Court in Morris-Garner. We have explored this issue in depth in chapter 18 where there was full reference to the main cases supporting a restitutionary analysis. It is the view of this author that, despite what was said in the Supreme Court in Morris-Garner, a restitutionary analysis of many of the ‘negotiating damages’ cases remains convincing. If that is correct, ‘negotiating damages’ as a restitutionary remedy, with the main relevant cases being those set out in the last chapter as adopting a ‘restitutionary analysis’,5 should be seen alongside the restitutionary remedies in this chapter. In particular, those damages would form a less extreme profit-stripping remedy (stripping a fair percentage of profits wrongfully made) alongside the remedies stripping all profits examined in this chapter.
(2) Alternative analysis
What complicates this chapter’s concern solely with restitution for wrongs (whether by a tort or breach of contract) is that in some situations where a claim for restitution could be based on a tort or breach of contract, there is an alternative claim that does not rely on the wrong and rather is based on the cause of action of unjust enrichment. This ‘alternative analysis’ is best understood by reference to an example. Say the defendant has induced the claimant to give her £25 by a deliberate misrepresentation of fact. Irrespective of establishing the tort of deceit, and then going on to consider whether the law is willing to strip gains made by the tort of deceit, the claimant has an independent good reason for a restitutionary remedy based on an unjust enrichment; namely he has paid £25 to the defendant under an induced mistake of fact which taints the validity of the transfer of value. The fact that the defendant has deliberately lied causing the claimant loss is irrelevant to that.
It follows that, where a wrong does result in an unjust enrichment at the expense of the claimant, the fact that there may be some restriction, preventing restitutionary remedies based on the wrong, will not necessarily rule out restitutionary remedies for the cause of action of unjust enrichment, and vice versa. It also follows that, where attention is being focused solely on restitution for wrongs as in this chapter, some care must be taken not to include cases based instead on the cause of action of unjust enrichment.
(3) The terminology of disgorgement in preference to restitution?
We have explained that this book is concerned with what has been labelled ‘restitution for wrongs’ as opposed to restitution of an unjust enrichment at the expense of the claimant (where ‘at the expense of the claimant’ means that there has been a transfer of value by the (p. 337) claimant to the defendant). Terminologically, it is possible to sharpen the divide between the two by using the term ‘disgorgement’ instead of restitution where one is concerned with a gain-based remedy for a wrong.6 In other words, it is arguable that restitution is the more natural terminology for ‘giving back’ to the claimant the value transferred by the claimant to the defendant whereas, in the context of restitution for wrongs, one is concerned not with a giving back of value transferred but rather with a ‘giving up’ of profits made by committing a wrong to the claimant.
It is clear, however, that restitution can be used in the wider sense of a giving up of benefits as well as a giving back of benefits; conversely disgorgement can be used to refer to the giving back, as well as the giving up, of benefits. After some hesitation, it has therefore been decided to maintain the terminology previously used in this book of restitution for wrongs rather than switching to disgorgement for wrongs.
However, it is important to stress that the view here being taken is that, in the context of restitution for wrongs, restitution and disgorgement are synonymous so that nothing substantive should turn on the terminology preferred.
(4) Edelman’s thesis
James Edelman in his excellent book Gain-Based Damages7 put forward the novel thesis that so-called restitution for wrongs in fact embodies two different remedial gain-based measures which should be kept distinct. The first is the reversal of a wrongful transfer of value from a claimant to a defendant. He terms this measure ‘restitutionary damages’. The second is the stripping away of profits made by the defendant committing a wrong to the claimant. He calls this measure ‘disgorgement damages’. The importance of this distinction, according to Edelman, is that the former rests on corrective justice, is analogous to unjust enrichment, is relatively uncontroversial, and should be available for every type of wrong. The latter, in contrast, is designed to deter a wrong where compensatory damages are inadequate to do so. Disgorgement damages are, and should therefore be, restricted to two main circumstances. First, where a wrong is committed cynically with a view to making material gain and the profit made exceeds the compensation payable; and, secondly, for breach of fiduciary duty (an equitable wrong) in order to protect the institution of trust inherent in the fiduciary relationship.
In previous editions of this book, Edelman’s distinction was explored in some depth, albeit to question its validity.8 One of the points made was that it was hard to reconcile that distinction with the law laid down in the cases so that, in particular, ‘negotiating damages’ were not standardly available for civil wrongs. In the light of the rejection of a restitutionary/gains-based analysis of negotiating damages by the Supreme Court in Morris-Garner v One Step (Support) Ltd,9 the clash between Edelman’s thesis and the present law is even more clear-cut than it was before.
Another point is that, despite the characteristic power of Edelman’s reasoning, it is far from clear that, in the context of the gain having been made by a wrong, anything of importance turns (or should turn) on whether the gain made by the wrong represents a transfer of value from the claimant or not. Put another way, there are two separate causes (p. 338) of action—the wrong and the unjust enrichment—and one cannot add them together to increase the force of the claim. In line with this criticism, it is submitted that the best ‘restitutionary’ analysis of negotiating damages—albeit, as we have seen, rejected by the Supreme Court in Morris-Garner v One Step (Support) Ltd which has preferred a compensatory approach—is that they have often been concerned to strip a proportion of the profits made by the wrongdoer.10 Put another way, using Edelman’s terminology, we are only ever concerned with ‘disgorgement damages’ and not ‘restitutionary damages’.
A final linked point is that, where the cause of action is a wrong, in contrast to unjust enrichment, compensation is a natural and uncontroversial measure of recovery. The courts will naturally gravitate towards any possible compensatory analysis of the remedial response to a wrong. In this respect, a difficulty with Edelman’s thesis is that, where there has been a transfer of value from the claimant to the defendant, this will commonly mean that there has been a loss to the claimant and, in the context of wrongs, that loss will naturally be seen as triggering a compensatory remedy. In other words, a restitutionary analysis will often be no more realistic than a compensatory analysis.11
3. Restitution for breach of contract102
(1) Restitution for breach of contract and unjust enrichment
We are here concerned with remedies that reverse gains because the defendant has acquired them by breach of a contract with the claimant.
It is initially important to stress that remedies, such as the recovery of money had and received for total failure of consideration and a quantum meruit, which an innocent party can claim once it has validly terminated a contract for breach, are better viewed as based on the cause of action of unjust enrichment, rather than being remedies for breach of contract.103 Three main features of the law support this view. First, the claimant must have validly terminated the contract, before it can claim these remedies. If the remedies were simply for breach of contract, there would be no need for this; whereas on the view that the cause of action is unjust enrichment this is readily explicable on the ground that it is only where the contract is terminated that the direct shift of wealth from the claimant to the defendant is invalidated. Indeed traditionally there has been a further restriction on the recovery of money in that there must have been a total rather than merely a partial failure of consideration.104
Secondly, even though no breach is involved, the same restitutionary remedies governed by the same, or very similar, principles are available where the contract is unenforceable or is void (for example, for uncertainty) or is merely anticipated. Prior to the Law Reform (Frustrated Contracts) Act 1943 this was also true of the remedies available where the contract was frustrated.
Thirdly, it is no restriction on the recovery of money paid in an action for money had and received that the defendant had made a good bargain. Say, for example, the claimant contracts to buy a car from the defendant for £900 and pays £100 in advance; the defendant fails to deliver the car: the market price is £700: the claimant can recover £100 in an action for money had and received.105 This cannot be sensibly explained if the recovery is regarded as a restitutionary remedy for the breach of contract: for the breach cannot be (p. 353) regarded as a cause of the defendant’s gain, since if there had been no breach, the defendant would still have made that gain from the contract. The same may also be the law regarding the claimant’s quantum meruit claim. Certainly in Lodder v Slowey106 on appeal from New Zealand, the Privy Council in assessing the claimant’s quantum meruit considered it irrelevant that the defendant might have made a good bargain so that he would have retained some part of that gain if he had not broken the contract. Again, this aspect of the law is readily explicable if one regards such restitutionary remedies as reversing an unjust enrichment rather than being remedies for breach of contract; for if the basis is not breach of contract, but rather an invalidation of the shift of wealth from the claimant to the defendant, there is no necessary reason why the value of the defendant’s contractual counter-performance should be regarded as relevant.107
But if the remedies just discussed are not restitutionary remedies for breach of contract, does the law ever award restitution for breach of contract?
(2) The law, and analysis, prior to Blake
The traditional view, prior to Attorney-General v Blake,108 was that there can be no restitution for breach of contract. So, for example, in the Scottish case of Teacher v Calder,109 the defendant financier broke a contract to invest £15,000 in the claimant’s timber business, and instead invested the same sum in a distillery. It was held that the claimant’s damages were to compensate for the loss to his business and were not concerned with a disgorgement of the much higher profits the defendant had gained from the distillery investment.
The same view applied in England. As Megarry V-C said in Tito v Waddell (No 2):110
So in that case it was irrelevant that the defendants had saved themselves considerable expense by not replanting Ocean Island as they had covenanted to do. The claimant’s loss was alone considered relevant and, as the islanders no longer intended to replant the island and were therefore not entitled to the cost of cure, only a small sum of damages for the trivial difference in value of the land was awarded.111
It is important to stress that while the cost of cure may, in some cases, be equivalent to the expense saved, there is no necessary correlation between the two: for example, where cheaper materials have been used in building, the cost of replacing them is likely to be far greater than the expense the defendant saved. In a nutshell, cost of cure damages are compensatory and not restitutionary. One should also clarify that, applying a standard ‘difference in value’ compensatory award for breach of contract, one is comparing the value of the services or goods that the claimant should have received and the value of the services or goods actually received. A breach of contract by ‘skimped performance’ leads naturally (p. 354) to a standard difference in value compensatory award and it only serves to confuse matters to treat such an award as if it were granting restitution for the expense saved by breach.112
Again, prior to the Blake case, in Surrey CC v Bredero Homes Ltd113 the Court of Appeal refused to award restitution for a breach of contract. The claimant councils had sold two adjoining parcels of land to the defendant for the development of a housing estate. The defendant covenanted to develop the land in accordance with the scheme approved by the claimants. In breach of that covenant it built more houses on the site than under the approved scheme, thereby making extra profit. Although aware of the breach, the claimants did not seek an injunction or specific performance but waited until the defendant had sold all the houses on the estate and then sought damages. Nominal damages only were awarded on the ground that the claimants had suffered no loss. A restitutionary award was thought inappropriate because this was an action for ordinary common law damages for breach of contract: it did not involve either a tort or an invasion of proprietary rights or equitable damages.
On one interpretation, Wrotham Park Estate Co v Parkside Homes Ltd114 constituted a significant exception to this denial of a restitutionary remedy for breach of contract. We have looked at that case in the last chapter on ‘negotiating damages’. Two points should be stressed about the award of damages in that case. First, Brightman J accepted that it was artificial to pretend that the claimant would ever have relaxed the covenant; and, secondly, in assessing the reasonable release fee, Brightman J looked at the defendant’s profits from the breach of £50,000 and awarded 5% of those profits (£2,500). Both of those features might be thought to indicate that Brightman J was more concerned to strip the wrongdoer of part of its profits from breach than to compensate the claimant for a loss. But, as we have seen in the last chapter, attractive as a restitutionary analysis of that case might be thought to be, it has been rejected by the Supreme Court in Morris-Garner v One Step (Support) Ltd, which has taken a compensatory interpretation of ‘negotiating damages’.
Assuming then that, prior to Attorney-General v Blake, there was no case law awarding restitution for breach of contract, was that state of the law satisfactory? Several commentators argued that it was not. For example, Jones wrote, ‘It is difficult to accept the justice of the result of such cases as Tito v Waddell (No 2), where the defendant had saved himself considerable expense from failing to execute his promise but where the plaintiff’s damages were trivial because he had suffered no “loss”.’115 Jones cited the Louisiana case of City of New Orleans v Fireman’s Charitable Association116 as a further striking example of injustice. The defendant had contracted with the claimant to provide a fire-fighting service over a number of years and had received the full contract price. After the expiry of the contract, the claimant discovered that the defendant had not had available the number of men or horses or the footage of pipe promised under the contract. As the claimant had suffered no loss—for example, there was no averment that the defendant had failed to extinguish any fires because of the breach—no substantial damages were recovered, despite the fact that the defendant had saved itself over $40,000 by the breach of contract.
(p. 355) Birks, too, applying a cynical wrongdoing test, argued that restitution should be more widely available as a remedy for breach of contract.117 As an example of cynical wrongdoing he pointed to Tito v Waddell (No 2)118 as a case in which restitution, rather than nominal or a small sum of compensatory damages, should have been awarded. It was also a theme of Birks’ work that, contrary to the picture of the law traditionally painted, sometimes the label ‘breach of fiduciary duty’ was merely acting as a mask for what were in reality already examples of restitution for breach of contract.119
Some expansion of restitution was also advocated by Beatson.120 He saw restitution as ‘in reality a monetised form of specific performance’. This is because if a person knows she will be stripped of her profits from breach there is no advantage for her in breaking the contract. Restitution is therefore justified in the rare cases where specific performance is available (or would have been available were it not now too late for such an order); most obviously where damages are inadequate. This theory has the attraction of building on existing principles of contract law. However, on closer inspection it is far from clear that one would want to apply principles of specific performance to restitution. For example, would general bars to specific performance, such as the bar to specific performance in contracts of personal service or the severe hardship bar, apply also to rule out restitution? And how would the theory apply to negative contractual promises where the prohibitory injunction is the primary remedy and damages are generally regarded as inadequate? It would be odd if restitution were widely available for the breach of negative but not positive promises.
In contrast, Jackman suggested that there may be no need for restitution to protect the facilitative institution of contract because protection is sufficiently afforded by the standard award of expectation damages.121 In other words, one of the justifications for awarding expectation damages is to protect the institution of contract. On his view, Wrotham Park was a rare and acceptable exception because it was not a pure contract case. Breach of a restrictive covenant constitutes the infringement of a proprietary right and falls to be treated like a ‘proprietary tort’.
Support for the denial of restitution is also derived from the ‘efficient breach’ theory that it is more economically efficient to allow breach of contract than to deter it, as restitution would prima facie do.122 But this sort of argument has been considered in detail and rejected elsewhere in this book,123 and here it is sufficient to point out that a restitutionary remedy will not necessarily deter the defendant from an efficient breach—namely one where the profits to be made from breach exceed the claimant’s expectation loss—because it will be in both parties’ interests to negotiate the defendant’s release from the contract. Say D contracts to make a machine part for C for £10,000, which C values at £13,000. X offers D £15,000 for that part. The fact that C may be entitled to restitution of say £5,000 for breach, (p. 356) would not deter the efficient result of D delivering the part to X, because it is in C’s interest to accept between £3,000 and £5,000 to release D from the contract (because if D sticks to the contract, C will make only £3,000) and in D’s interest to pay up to £5,000 to C to be released to transfer the part to X.
(3) Attorney-General v Blake and its aftermath
All previous writings and case law on restitution for breach of contract must now be read in the light of the fascinating and still controversial decision of the House of Lords in Attorney-General v Blake.124
The notorious spy, George Blake, had written his autobiography in 1989. The publishers had agreed to pay him, as an advance against royalties, three sums of £50,000 on signing the contract, delivery of the manuscript, and on publication. They had paid him £60,000 so that £90,000 was still owing. The Crown sought to stop him being paid that £90,000 and for that sum, instead, to be paid to the Crown. Their claims were brought in both public and private law. The Court of Appeal had upheld Sir Richard Scott V-C’s decision at first instance that Blake was not acting in breach of fiduciary duty in publishing the book because there was no fiduciary duty owed by an ex-employee to the Crown. There was also no question of a breach of confidence claim succeeding because, by the time of publication, the information in the book was in the public domain and no longer confidential. But the Court of Appeal had decided that a public law claim should succeed: the Attorney-General, as an extension of his power to obtain injunctions in aid of the criminal law in furtherance of the public interest, was entitled to an order for payment so as to prevent Blake receiving money from his breach of the Official Secrets Act 1989.
The House of Lords firmly rejected that novel public law order on the ground that, without any established private law claim, it constituted a criminal confiscatory order that had not been expressly authorised by Parliament. Nevertheless the House of Lords (Lord Hobhouse dissenting) found in favour of the Crown not in public law but by revisiting obiter dicta of the Court of Appeal in relation to whether the Crown was entitled to the private law remedy of ‘restitutionary damages’ for breach of contract.
The argument that succeeded was based on the fact that, while there was no cause of action for breach of fiduciary duty or for breach of confidence, there was a cause of action for breach of contract. Blake had expressly undertaken at the beginning of his employment not to publish, during or after his employment with the Secret Service, any official information gained by him as a result of that employment. And, although the normal remedy for breach of contract is damages, compensating the claimant, this was regarded as an exceptional case where an account of profits,125 aimed at a disgorgement of the gains made from the breach of contract, could, and should, be awarded.
Lord Nicholls, giving the leading speech, elegantly drew together the cases in which the courts have awarded restitution for, for example, proprietary torts, intellectual property torts, and breach of fiduciary duty, and—alongside the ‘solitary beacon’126 of the Wrotham (p. 357) Park case as an example of restitution being awarded for breach of contract—his Lordship concluded that there was no good reason in principle why an account of profits should not be awarded for breach of contract.127 However, as to when such an order would be made, his Lordship’s speech is rather thin on detail and relies heavily on this being at the discretion of the court. He stressed that an award would be exceptional and should only be made where the standard remedies for breach of contract of compensatory damages or specific performance or an injunction were inadequate. He said:
Later in his speech his Lordship said that three facts which, individually, would not constitute a good reason for ordering an account of profits are:
It is obvious that phrases like ‘inadequacy’130 and ‘legitimate interest’ are open-ended and import a wide degree of judicial discretion. They could be used to justify an account of profits in a wide or a narrow range of cases. The crucial point, therefore, is that the House of Lords regarded restitution as an exceptional remedy reserved for rare cases. However, we must then ask, how exceptional and how rare?
The Blake case itself was unusual. What Blake had done came very close to being, but was not quite, a breach of fiduciary duty and a breach of confidence. Moreover, the courts had no sympathy with a notorious traitor whose book profits would to some extent have derived from his crime of breaking the Official Secrets Act. One might therefore be tempted to dismiss this case as so exceptional that it is a ‘one-off’ that will not be repeated. That would be a mistake. It is submitted that there will be a limited range of cases where an account of profits will be awarded for a breach of contract. Certainly after Blake one must bear this in mind as a possibility whenever one is concerned with remedies for breach of contract. So, for example, although perhaps not formally overruled, it is clear that the House of Lords did not like the decision in Surrey County Council v Bredero.131 If similar facts were to reoccur after Blake, it is strongly arguable that the defendant would be held liable to the claimant (p. 358) to account for profits made from building the extra houses.132 Although the loss to the claimant from the breach may have been minimal, Blake means that the claimant need not be limited to nominal damages. Again, one may draw on cases, which have traditionally been rationalised on the basis of a breach of fiduciary duty but which Lord Nicholls indicated are, in substance, examples of an account of profits being granted for breach of contract. For example, in Reid-Newfoundland Co v Anglo-American Telegraph Co Ltd133 the defendant company agreed not to transmit any commercial messages, other than the claimant’s messages, over a particular telegraph wire. The Privy Council held the defendant liable to account for the profits made in breach of that agreement. Similarly, Lord Nicholls indicated that the award of damages in British Motor Trade Association v Gilbert,134 for breach of a covenant not to resell a car within a certain period of time, was in reality concerned to strip the defendant of the profits he had made by breaking that covenant.
In contrast, it is unlikely that, where the assessment of expectation damages is straightforward, the courts would wish to strip away the gains made by a defendant breaking one contract in order to enter into another more lucrative contract. Indeed, as we have seen, Lord Nicholls expressly said that such a fact alone would not justify an account of profits. To lock parties into less profitable contracts would be inconsistent with the general approach in English law whereby specific performance is not the primary remedy for breach of contract.
That Blake was not a one-off has been shown by Esso Petroleum Co Ltd v Niad135 in which Sir Andrew Morritt V-C decided that the claimants were entitled, at their election, to compensatory damages or an account of profits or a ‘restitutionary remedy’ for breach of contract. Niad, who owned a petrol station, had entered into a pricing agreement (called ‘Pricewatch’) with Esso who supplied Niad with petrol. In breach of that agreement, Niad charged higher prices to its customers than had been agreed. This in turn meant that Niad was given ‘price support’ by Esso to which Niad was not entitled: that is, Niad paid less to Esso for its petrol than it would have done had Esso known that Niad was over-charging its customers. Applying Blake, Morritt V-C held that Esso was here entitled to an account of profits aimed at stripping away the gains Niad had made from breaking the contract. Compensatory damages were inadequate because it was almost impossible for Esso to establish that sales had been lost as a result of the breach by Niad. The breach undermined the whole Pricewatch scheme that Esso had agreed with all retailers in the area. Esso had complained to Niad on several occasions. And Esso had a legitimate interest in preventing Niad from profiting from its breach. Alternatively, Morritt V-C said that Esso was entitled to a ‘restitutionary remedy’ for the amount of the price support that, in breach of contract, it had obtained from Esso.
(p. 359) Although the distinction between an account of profits and the so-called ‘restitutionary remedy’ is a difficult one to draw on these facts (ie it is not clear what the difference is between the two) the great importance of the case is that it shows Blake being applied to a commercial contract far removed from the peculiar facts of Blake itself.136
In conclusion, it is tentatively suggested, in the light of Blake, that an account of profits is an appropriate remedy for a breach of contract where two factors are present. First, the breach of contract must be cynical, deliberately calculated to make gains. It is this that triggers the courts’ wish to deter the breach by stripping the gains. The breach was cynical in Blake and in Esso v Niad Petroleum. The same can be said, although restitution was refused, of the earlier cases of Tito v Waddell and Surrey County Council v Bredero Homes. But, as Lord Nicholls stressed, this is not a sufficient condition. This is because there are many cynical breaches (for example, where a party to a commercial contract of sale breaks it in order to enter into a more lucrative contract with someone else) that the law does not wish to deter.137 The second factor that must also be present, therefore, is that normal compensatory damages are ‘inadequate’ in the sense that difficulties of assessment, or bars to the recovery of certain types of damages, mean that compensatory damages will not put the claimant into as good a position as if the contract had been performed. In other words, compensatory damages will not properly protect the claimant’s contractual expectations. In cases like Surrey County Council v Bredero Homes and Tito v Waddell and Blake the claimants had non-financial expectations which would not be protected by compensatory damages; their interests were in protecting the environment or in protecting national security. And in Esso v Niad, while the claimants entered into the contract for financial reasons, the assessment of damages compensating their financial losses would be highly problematic and prone to error.
1 For the law of restitution, incorporating both restitution of an unjust enrichment and restitution for wrongs, see, generally, P Birks, An Introduction to the Law of Restitution (rev edn, Clarendon Press 1989); A Burrows, The Law of Restitution (3rd edn, OUP 2011); G Virgo, The Principles of the Law of Restitution (3rd edn, OUP 2016). For the law of unjust enrichment, see Goff and Jones on the Law of Unjust Enrichment (eds C Mitchell, P Mitchell, and S Watterson, 9th edn, Sweet & Maxwell 2016); P Birks, Unjust Enrichment (2nd edn, OUP 2004); A Burrows, A Restatement of the English Law of Unjust Enrichment (OUP 2012); J Edelman and E Bant, Unjust Enrichment (2nd edn, Hart Publishing 2016).
2 Apart from the relevant chapters in the works cited in the previous note, see generally I Jackman, ‘Restitution for Wrongs’  CLJ 302; P Birks, ‘Civil Wrongs: A New World’ (Butterworths Lectures 1990–91, Butterworths 1992); Law Commission, Aggravated, Exemplary and Restitutionary Damages (1997) Report No 247 Pt III; J Edelman, Gain-Based Damages (Hart Publishing 2002); C Rotherham, ‘The Conceptual Structure of Restitution for Wrongs’  CLJ 172. For discussion of the problems of multiple defendants and multiple claimants in respect of restitution for wrongs, see A Burrows, ‘Reforming Non-Compensatory Damages’ in The Search for Principle (eds W Swadling and G Jones, OUP 1999) 295, 307–310. For a comparative examination of ‘restitution for wrongs’ across the world, see Disgorgement of Profits: Gain-Based Remedies throughout the World (eds E Hondius and A Janssen, Springer 2015).
3 For (pre-judgment) interest on restitutionary remedies, see A Burrows, The Law of Restitution (3rd edn, OUP 2011) 21–25 (although that must now be read in the light of Prudential Assurance Co Ltd v HMRC  UKSC 39,  3 WLR 652). For limitation periods for restitution for torts or breach of contract, see pp 703–705 of the same title.
4  UKSC 20,  2 WLR 1353.
6 This was the preferred approach of L Smith, ‘The Province of the Law of Restitution’ (1992) 21 Can BR 672.
7 (Hart Publishing 2002).
8 See the 3rd edition at pp 374–375. Edelman has carried through his distinction into the latest edition of J Edelman, McGregor on Damages (20th edn, Sweet & Maxwell 2018).
9  UKSC 20,  2 WLR 1353. See above, ch 18.
11 A plausible response to this might be that, often, a transfer of value equates only to an objective loss and not a loss that this claimant has itself suffered because, for example, it would never have sold its property or services; and that at least normally in relation to compensatory damages one is concerned with the loss to the particular claimant. One might add that, in contrast, the standard approach to benefits in the law of unjust enrichment is to take, as a starting point, an objective approach, which might then be modified by ‘subjective devaluation’: but that in the context of wrongs, a wrongdoer ought not to be permitted to deny that it is benefited by the objective benefit. The plausibility of this response may turn on whether it is coherent to approach benefits more objectively than loss. For discussion of the distinction between the claimant’s loss and the defendant’s gain in the context of unjust enrichment, see A Burrows, The Law of Restitution (OUP 2011) 64–65.
12 See generally L Teller, ‘Restitution as an Alternative Remedy for a Tort’ (1956) 2 NY Law Forum 40; K York, ‘Extension of Restitutional Remedies in the Tort Field’ (1957) 4 UCLALR 499; J Hodder, ‘Profiting from Tortious Use of Property: A Reply to the Lost Bargain Theory’ (1984) 42 UT Fac LR 105; J Beatson, The Use and Abuse of Unjust Enrichment (Clarendon Press 1991) 206–243.
13 Rescission may simply be concerned to allow escape from a contract. For the same reasons as those in the text such rescission is best viewed as not being a remedy for a tort and hence as being outside this book’s scope.
14 P Birks, An Introduction to the Law of Restitution (rev edn, Clarendon Press 1989) 167–171; A Burrows, The Law of Restitution (3rd edn, OUP 2011) 246–253.
15 C Witting, Street on Torts (15th edn, OUP 2018) 339.
16 P Birks, An Introduction to the Law of Restitution (rev edn, Clarendon Press 1989) 347. Cf A Burrows, The Law of Restitution (3rd edn, OUP 2011) 10–11.
17 Chesworth v Farrar  1 QB 407, and reasoning in Phillips v Homfray (1883) 24 Ch D 439.
18 A Burrows, The Law of Restitution (3rd edn, OUP 2011) 703–704.
19 For influential cases in the US see, eg, Federal Sugar Refining Co v US Sugar Equalisation Bd 286 F 575 (1920) (profits from inducing breach of contract); Edwards v Lee’s Administrators 96 SW 2d 1028 (1936) (account of profits for trespass to land); Raven Red Ash Coal Co v Ball 39 SE 2d 231 (1946) (value of use of land); Olwell v Nye and Nissen Co 26 Wash 2d 282 (1946) (reasonable value of use/expense saved by conversion of egg-washing machine). Cf Hart v EP Dutton & Co Inc 93 NYS 2d 871 (1949) (refusing restitution for libel). See, generally, G Palmer, Law of Restitution (Little, Brown & Co 1978) Vol I, 49–140, 157–166; Restatement of the Law Third, Restitution and Unjust Enrichment (American Law Institute 2011) ch 5.
20 (1701) 2 Ld Raym 1216.
23  1 QB 407, at 417.
26 Chadwick LJ’s obiter dicta in WWF-World Wide Fund for Nature v World Wrestling Federation Entertainment Inc  EWCA Civ 286,  1 WLR 445, to the effect that an account of profits is compensatory, should be dismissed as confused (or as using the word ‘compensation’ in a loose and unhelpful sense to cover any monetary remedy for a wrong).
27 (1968) 122 CLR 25, at 32.
28 In Hollister Inc v Medik Ostomy Supplies Ltd  EWCA Civ 1419,  Bus LR 428, it was made clear that, despite its reference to ‘any unfair profits made by the defendant’ under the heading of ‘assessment of damages’ for infringement of an intellectual property right, regulation 3 of the Intellectual Property (Enforcement etc) Regulations 2006, which gives effect to Article 13 of the Intellectual Property Rights Enforcement Directive, 2004/24/EC, has not altered the approach in English law to an account of profits (and the need for a claimant to elect between an account of profits and damages).
29 Patents Act 1977, s 61(1)(d); Siddell v Vickers (1892) 9 RPC 152. Presumably design infringement is analogous.
30 Copyright, Designs and Patents Act 1988, s 96(2); Delfe v Delamotte (1857) 3 K & J 581; Potton Ltd v Yorkclose Ltd  FSR 11. For those with a publication right or a database right having essentially the same rights as a copyright owner, see above, p 228 n 266.
31 Copyright, Designs and Patents Act 1988, s 229(2).
33 Edelsten v Edelsten (1863) 1 De GJ & SM 185; Slazenger & Sons v Spalding & Bros  1 Ch 257; Hollister Inc v Medik Ostomy Supplies Ltd  EWCA Civ 1419,  Bus LR 428.
34 Lever v Goodwin (1887) 36 Ch D 1; My Kinda Town Ltd v Soll  FSR 147; rvsd on liability  RPC 407.
38 Lever v Goodwin (1887) 36 Ch D 1; AG Spalding & Bros v AW Gamage Ltd (1915) 84 LJ Ch 449; My Kinda Town Ltd v Soll  FSR 147, rvsd on liability  RPC 407.
39 Edelsten v Edelsten (1863) 1 De GJ & Sm 185; Slazenger & Sons v Spalding & Bros  1 Ch 257; Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25. Cf Trade Marks Act 1994, s 14(2): ‘In an action for infringement [of a registered trade mark] all such relief by way of damages, injunctions, accounts or otherwise is available to him as is available in respect of the infringement of any other property right.’
40 Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25.
41 Gillette UK Ltd v Edenwest Ltd  RPC 279.
42 (1968) 122 CLR 25, at 34.
43  FSR 147, at 156; rvsd on liability  RPC 407. See also Potton Ltd v Yorkclose Ltd  FSR 11.
44 Lever v Goodwin (1887) 36 Ch D 1, where the amount of profits included sales to non-confused customers, was distinguished on the unconvincing ground that the sales there were to middlemen.
45 (1968) 122 CLR 25, at 37.
46 (1888) 13 App Cas 401, at 412–413.
48  RPC 203, esp at .
49 In Lord Nicholls’s words in Attorney-General v Blake  1 AC 268, at 286: an expense saved (in the sense of a part refund of the price agreed for services) does ‘not fall within the concept of an account of profits as ordinarily understood’. But it might help to think of the account of profits as an account of gains: and gains can be negative as well as positive. Note also that there is an analogy with the controversy in Phillips v Homfray (1883) 24 Ch D 439, discussed below at pp 347–348, as to whether an award of money had and received can include an expense saved.
50 For general discussion, see J Edelman, Gain-Based Damages (Hart Publishing 2002) 73–76.
52  UKSC 20,  2 WLR 1353: see above, ch 18.
53  RPC 203, esp at –.
54 R Stevens, Torts and Rights (OUP 2007) 83–84 suggests, with respect unpersuasively, that this restriction tends to show that one is not here concerned with profit-stripping: rather the ‘profits traceably represent the value of the right infringed’.
55 Cf the trade mark infringement case of Hollister Inc v Medik Ostomy Supplies Ltd  EWCA Civ 1419,  Bus LR 428, in which the Court of Appeal, while not directly addressing this point about non-infringing production, did make clear that deductions from the defendant’s profits should be made to reflect opportunity costs if the defendant could support such deductions by evidence. The precise point laid down was that it was too broad-brush an approach simply to deduct from the profits a proportion of the defendant’s general overheads: rather it was for the defendant to prove by evidence that costs had been incurred that would not have been incurred but for the infringement and should therefore be deducted. See also, eg, OOO Abbott v Design and Display Ltd  EWHC 932 (IPEC),  FSR 43.
56  HCA 43, (2008) 360 ALR 1. See below, p 536.
57 But see, in support, Robert Goff J’s dicta in Redwood Music Ltd v Chappell & Co Ltd  RPC 109, at 132 (innocent copyright infringement).
59 ibid, at 730. See also Crosley v Derby Gas Light Co (1838) 3 My & Cr 428; Siddell v Vickers (1892) 9 RPC 152.
60  FSR 147, at 159. See also Potton Ltd v Yorkclose Ltd  FSR 11.
61  1 AC 268, at 288.
62 Neilson v Betts (1871) LR 5 HL 1; De Vitre v Betts (1873) LR 6 HL 319; Patents Act 1977, s 61(2); Colbeam Palmer Ltd v Stock Affiliates Pry Ltd (1968) 122 CLR 25; Island Records Ltd v Tring International plc  1 WLR 1256, noted by P Birks, ‘Inconsistency Between Compensation and Restitution’ (1996) 112 LQR 375; Spring Form Inc v Toy Brokers Ltd  FSR 276, noted by L Bently and C Mitchell, ‘Combining Money Awards for Patent Infringement’  RLR 79; Hollister Inc v Medik Ostomy Supplies Ltd  EWCA Civ 1419,  Bus LR 428, at –. See analogously United Australia Ltd v Barclays Bank Ltd  AC 1 in which it was accepted that a claimant cannot recover both compensatory damages and an award of money had and received for a tort. See also on breach of fiduciary duty Mahesan S/O Thambiah v Malaysian Government Officers Co-operative Housing Society  AC 374; Tang Min Sit v Capacious Investments Ltd  AC 514. See, generally, M Tilbury, Civil Remedies (Butterworths 1990) paras 2015, 2027. See also above, pp 13–15.
63 (1871) LR 5 HL 1, at 22.
67 United Australia Ltd v Barclays Bank Ltd  AC 1; Tang Min Sit v Capacious Investments Ltd  AC 514.
69  AC 1129, at 1226. See below, ch 20.
70 Law Commission, Aggravated, Restitutionary and Exemplary Damages (1997) Report No 247, paras 3.50–3.51.
73 (1883) 24 Ch D 439, at 471–472.
74 R Goff and G Jones, The Law of Restitution (3rd edn, Sweet & Maxwell 1986) 611.
75 (1883) 24 Ch D 439, at 460–461 (author’s italics).
76 Above, p 336. P Birks, An Introduction to the Law of Restitution (rev edn, Clarendon Press 1989) 323. See, similarly, G Virgo, The Principles of the Law of Restitution (3rd edn, OUP 2015) 450–452.
77 R Goff and G Jones, The Law of Restitution (7th edn, Sweet & Maxwell 2007) para 36-003: the reasoning ‘may have been then valid but … can no longer be supported’. See also S Hedley, ‘Unjust Enrichment as the Basis of Restitution—an Overworked Concept’ (1985) 5 Legal Studies 56, 64; W Gummow, ‘Unjust Enrichment, Restitution and Proprietary Remedies’ in Essays on Restitution (ed P Finn, Law Book Co 1990) 60–67.
78 W Swadling, ‘The Myth of Phillips v Homfray’ in The Search for Principle (eds W Swadling and G Jones, OUP 1999) 277–294.
79 W Swadling, ‘The Myth of Phillips v Homfray’ in The Search for Principle (eds W Swadling and G Jones, OUP 1999) 294.
80 Taking account of all the stages of the litigation, Birks regarded the case as ‘indisputably authority in favour of the proposition that an account does lie for the profits of a trespass’: P Birks, ‘Civil Wrongs: A New World’ (Butterworths Lectures 1990–91, Butterworths 1992) 64–67.
83  UKSC 20,  2 WLR 1353. See above, ch 18.
84  1 WLR 1406, at 1415.
86 At first instance in Murad v Al-Saraj  EWHC 1235, at – Etherton J appeared to accept that an account of profits can be awarded for the tort of deceit but in the Court of Appeal,  EWCA Civ 959,  WTLR 1573, esp at , the award was recast as being a conventional award for breach of fiduciary duty.
87  Ch 217, at 227.
88  EWCA Civ 505,  Env LR 41. C Rotherham, ‘Gain-Based Relief in Tort after Attorney-General v Blake’ (2010) 126 LQR 102 is heavily critical of this case and the Devenish case, discussed below.
89 And even if, applying Wrotham Park, a reasonable fee might have been awarded as damages, he assessed such a fee as being 15% of the profit (£1,050) which, being less than the sum awarded as compensation, was of no use to the claimant.
90 See esp  EWCA Civ 505,  Env LR 41, at .
91  1 AC 268. See below, pp 356–358.
92  EWCA Civ 1086,  3 WLR 198. For an excellent case-note, see O Odudu and G Virgo, ‘Remedies for Breach of Statutory Duty’  CLJ 32.
93  EWCA Civ 1086,  3 WLR 198, at .
94  1 WLR 1406, at 1410.
95 I Jackman, ‘Restitution for Wrongs’  CLJ 302.
96  1 AC 268: see the next section below.
97 See P Birks, An Introduction to the Law of Restitution (rev edn, Clarendon Press 1989) 326–327.
98 Street also gave examples for the tort of battery in H Street, Principles of the Law of Damages (Sweet & Maxwell 1962) 254.
100 Cassell & Co Ltd v Broome  AC 1027, at 1130 (per Lord Diplock); A Ashworth, Sentencing and Penal Policy (Weidenfeld & Nicolson 1983) 294.
101 Law Commission, Aggravated, Exemplary and Restitutionary Damages (1997) Report No 247, para 3.51 and Draft Bill, cl 12.
102 See, generally, G Jones, ‘The Recovery of Benefits Gained From a Breach of Contract’ (1983) 99 LQR 443; A Farnsworth, ‘Your Loss or My Gain? The Dilemma of the Disgorgement Principle in Breach of Contract’ (1985) 94 Yale LJ 1339; P Birks, ‘Restitutionary Damages for Breach of Contract: Snepp and the Fusion of Law and Equity’  LMCLQ 128; S Stoljar, ‘Restitutionary Relief for Breach of Contract’ (1989) 2 JCL 1; R O’Dair, ‘Restitutionary Damages for Breach of Contract and The Theory of Efficient Breach: Some Reflections’ (1993) 46(2) CLP 113; E Weinrib, ‘Punishment and Disgorgement as Contract Remedies’ (2003) 78 Chicago-Kent LR 55; G Palmer, Law of Restitution (Little, Brown & Co 1978) Vol I, 437–452; J Beatson, The Use and Abuse of Unjust Enrichment (Clarendon Press 1991) 15–17; Restatement of the Law Third, Restitution and Unjust Enrichment (American Law Institute 2011) 646–670. For discussion of the law in Scotland, but rejecting legislative reform (in relation to ‘gain-based damages’, whether an account of profits or a reasonable fee), see Scottish Law Commission, Report on Review of Contract Law: Formation, Interpretation, Remedies for Breach, and Penalty Clauses (2018) Report No 252, ch 17.
103 P Birks, An Introduction to the Law of Restitution (rev edn, Clarendon Press 1989) 334; P Birks, ‘Restitution and the Freedom of Contract’ (1983) 36 CLP 141, 149 ff.
104 The requirement that the failure of consideration be total has come under attack both in decisions and from commentators: see A Burrows, The Law of Restitution (3rd edn, OUP 2011) 322–324, 330–334.
105 Wilkinson v Lloyd (1845) 7 QB 27.
106  AC 442. See also Boomer v Muir 24 P 2d 570 (1933).
107 This is not to deny that there may be other good reasons for thinking Lodder v Slowey incorrect: eg, it can be strongly argued that, given ‘subjective devaluation’, the contract price should often be relevant to unjust enrichment in assessing the services’ value to the defendant.
110  Ch 106, at 332.
111 An interim sum, which it was argued the claimants would have accepted for releasing the defendants from their obligation, was also rejected, ibid, at 319: see above, p 200.
112 This was a point made by Lord Nicholls in Attorney General v Blake  1 AC 268, at 286, and, especially clearly, by Lord Reed in Morris Garner v One Step (Support) Ltd  UKSC 20,  2 WLR 1353, at .
113  1 WLR 1361. See R O’Dair, ‘Remedies for Breach of Contract: A Wrong Turn’  RLR 31; A Burrows, ‘No Restitutionary Damages for Breach of Contract’  LMCLQ 453.
114  1 WLR 1361. See R O’Dair, ‘Remedies for Breach of Contract: A Wrong Turn’  RLR 31; A Burrows, ‘No Restitutionary Damages for Breach of Contract’  LMCLQ 453.
115 G Jones, ‘The Recovery of Benefits Gained from a Breach of Contract’ (1983) 99 LQR 443, 459.
117 P Birks, ‘Restitutionary Damages for Breach of Contract: Snepp and the Fusion of Law and Equity’  LMCLQ 421.
119 Birks relied on Reading v Attorney-General  AC 507; Reid-Newfoundland Co v Anglo-American Telegraph Ltd  AC 555; Lake v Bayliss  1 WLR 1073; and the dissenting judgment of Deane J in Hospital Products Ltd v United States Surgical Corpn (1985) 156 CLR 41.
120 J Beatson, The Use and Abuse of Unjust Enrichment (Clarendon Press 1991) 15–17. See, similarly, P Maddaugh and J McCamus, The Law of Restitution (2nd edn, Canada Law Book 2004) para 19.16 tentatively favouring restitution where compensatory damages are inadequate and yet equitable relief is not available.
121 I Jackman, ‘Restitution for Wrongs’  CLJ 302, 318–321. However, at the end of his analysis of breach of contract he very tentatively suggests that his secondary principle of the moral quality of the wrongdoing might justify restitution for cynical breach.
122 For this general theory, see R Posner, Economic Analysis of Law (9th edn, Wolters Kluwer 2014) 128–138, 145–146. See also below, pp 412 n 88, 413 n 91.
124  1 AC 268. For a useful case-note see D Fox, ‘Restitutionary Damages to Deter Breach of Contract’  CLJ 33. See, generally, E McKendrick, ‘Breach of Contract, Restitution for Wrongs, and Punishment’ in Commercial Remedies (eds A Burrows and E Peel, OUP 2003) ch 10. For a very hostile view of restitution for breach of contract, see D Campbell and D Harris, ‘In Defence of Breach: a Critique of Restitution and the Performance Interest’ (2002) 22 Legal Studies 208 and D Campbell and P Wylie, ‘Ain’t No Telling (Which Circumstances Are Exceptional)’  CLJ 605.
125 Lord Nicholls did not like the term ‘restitutionary damages’:  1 AC 268, at 284.
127 Lord Nicholls’ interpretation of the ‘wrongful use’ cases in tort and the Wrotham Park case in contract as awarding restitution has subsequently been contradicted by the compensatory analysis of ‘negotiating damages’ favoured in Morris-Garner v One Step (Support) Ltd  UKSC 20,  2 WLR 1353: see above, ch 18.
128  1 AC 268, at 285.
129  1 AC 268, at 286.
130 It is noteworthy that the inadequacy referred to is in respect of specific remedies as well as damages. But if compensatory damages are considered inadequate, and profits have been made from a past breach, it is likely to be rare for an injunction or specific performance to be ‘adequate’ (given that they can only ensure that there is no future or continuing breach).
131  1 WLR 1361. See above, p 354.
132 This may be thought to derive support from Lane v O’Brien Homes Ltd  EWHC 303 (QB) where the defendant developer built four houses, instead of three, in breach of a collateral contract with the claimant seller of the land. Applying the Wrotham Park case, David Clarke J upheld an award of damages of £150,000 based on the defendant’s estimated profit from building the extra house of £280,000. But this must now be read in the light of the compensatory approach to ‘negotiating damages’ taken in Morris-Garner v One Step (Support) Ltd  UKSC 20,  2 WLR 1353: see above, ch 18.
133  AC 555. See also Lake v Bayliss  1 WLR 1073 (breach of a contract to sell land); and CMS Dolphin Ltd v Simonet  2 BCLC 704 in which Lawrence Collins J said that, had an account of profits for breach of fiduciary duty not been available, he would have awarded an account of profits for breach of the contractual duty of fidelity in line with Blake.
135  All ER (D) 324 (Nov). See also the comments of the Supreme Court of Canada in Bank of America Canada v Mutual Trust Co  SCC 43 to the effect that restitution for breach of contract can be awarded but not where this would discourage efficient breach.
136 Blake was distinguished, so that an account of profits was refused for breach of contract because the facts were not sufficiently exceptional, in Stretchline Intellectual Properties Ltd v H & M Hennes & Mauritz (UK) Ltd  EWHC 162 (Pat),  RPC 15.
137 See, eg, AB Corpn v CD Company, The Sine Nomine  1 Lloyd’s Rep 805 in which an account of profits was refused by arbitrators for the withdrawal, and use, of a ship in breach of a charterparty.