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Part Three Restitution and punishment, 19 Restitutionary remedies (for torts and breach of contract)

Andrew Burrows

From: Remedies for Torts, Breach of Contract, and Equitable Wrongs (4th Edition)

Andrew Burrows QC FBA

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved.date: 21 September 2021

Subject(s):
Remedies for breach of contract — Loss of profit and damages

(p. 335) 19  Restitutionary remedies (for torts and breach of contract)

1.  Introduction

(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

2.  Restitution for torts12

(1)  Introduction

We are here concerned with remedies that reverse gains because the defendant has acquired them by committing a tort against the claimant. This is often what is meant by ‘waiver of tort’, that is, the claimant sues on the tort but seeks a restitutionary remedy rather than usual compensatory damages. But it can be argued that ‘waiver of tort’ also refers to where the claimant ignores the tort, and bases its claim for restitution on the cause of action of unjust enrichment. It should further be realised that the judicial usage of ‘waiver of tort’ appears to be confined to where the restitutionary remedy in issue is the award of money had and received (or one of the other ‘quasi-contractual’ remedies, like a quantum meruit) rather than being an account of profits. The term ‘waiver of tort’ is therefore ambiguous and unhelpful and should be avoided wherever possible.

It is also convenient to stress at this initial stage that rescission of a contract for misrepresentation where enrichments gained are reversed13 is better viewed as based on unjust enrichment, rather than a tort; that is, the reason for the remedy is essentially that the benefit has been rendered non-voluntarily because of induced mistake.14 This non-wrong (p. 339) analysis is supported by the facts that, first, rescission for misrepresentation is similar to that for undue influence, duress, mistake, and non-disclosure, where there is no tort (or wrong as such) involved; secondly, rescission was available for non-fraudulent misrepresentation, before the development of the tort of negligent misrepresentation or the passing of the Misrepresentation Act 1967; thirdly, rescission is an available remedy for a purely innocent misrepresentation which is not treated as a tort (or other wrong); and fourthly, for the torts involved, whether deceit, negligent misrepresentation, or under the Misrepresentation Act 1967, it is necessary to show damage resulting from the misrepresentation, that is, the torts are actionable only on proof of damage, whereas no damage needs to be proved for rescission.15

(2)  Why should a claimant want a restitutionary remedy for a tort, rather than compensatory damages?

The main and most obvious advantage is that the claimant may obtain more by restitution than compensation, since the gain the defendant has made by the tort may exceed the loss caused to the claimant by the tort.

But there may be other advantages in that a common law rule or a statutory provision may be regarded as barring compensatory damages but not a restitutionary remedy for the tort. Birks has argued that there can only be an evasion of a bar where it is the remedy (compensation) and not the cause of action (tort) that is barred.16 But whether illogical or not, the courts in the past have been willing to allow at least some restitutionary remedies for torts to evade bars on ‘tort actions’. The major example concerned the actio personalis rule, or what was left of it in the Law Reform (Miscellaneous Provisions) Act 1934, s 1(3), whereby there was a six-month limitation period for ‘tort actions’ against a wrongdoer’s personal representatives; for while this was regarded as barring tortious compensatory damages, it was considered not to be a bar to restitutionary remedies.17

It is worth adding as a postscript that, now that the Proceedings Against Estates Act 1970 has finally removed any trace of the unjust actio personalis rule, it is unlikely that the courts will see any reason to allow restitutionary remedies for a tort to avoid the six-year limitation period applicable to tortious compensatory damages.18 Certainly nothing in the Limitation Act 1980 contradicts this. An award of money had and received is not mentioned and, by the Limitation Act 1980, s 23, an action for an account of profits ‘… shall not be brought after the expiration of any time limit under the Act which is applicable to the claim which is the basis of the duty to account’, which does appear to mean that if the basis is tort, tort limitation periods should apply.

(3)  When are restitutionary remedies available for torts?

There are a number of cases which have awarded restitution for a tort rather than the more usual compensatory damages.19 These cases will be examined by dividing them according (p. 340) to whether the remedy given for the tort was money had and received or an account of profits.

(a)  Money had and received

An award of money had and received is automatically restitutionary: ie by its very nature it is looking at the defendant’s receipt and not just the claimant’s loss (if any). It is submitted, therefore, that it would be sufficient in proving that restitution may be awarded for a tort to point to cases in which this remedy has been awarded for a tort. But if the defendant’s gain correlates to the claimant’s loss, as is usually the case with this remedy in unjust enrichment, there is the conceivable re-interpretation that one is concerned with the well-established principle of compensating for wrongful loss. It follows that the best proof lies in the fact that in several cases awarding money had and received it is at least strained to regard the measure of recovery as corresponding to the claimant’s loss and it is more natural, either in the light of the amount awarded or the court’s reasoning or both, to regard the measure as solely concerned to strip the tortfeasor of some or all of the gains made by the tort.

First, there are the cases of Lamine v Dorrell20 and Chesworth v Farrar21 on the tort of conversion. In the former, the defendant had wrongfully converted the claimant’s Irish debentures by selling them off. It was held that the claimant could recover the actual sale price of the debentures. No investigation was made as to whether that sale had been at the market price. Had the claim been for compensatory damages the normal measure would have been the value of the goods assessed according to the market price at the date of the tort. It must be admitted, however, that the actual reasoning in the case weakens its authority as an example of restitution for the tort because, in justifying the measure, Holt CJ relied on an idea of ‘extinctive ratification’ agency reasoning which was later disapproved by the House of Lords in United Australia Ltd v Barclays Bank Ltd.22

In Chesworth v Farrar the deceased landlord had wrongfully converted, by selling off, property belonging to his tenant. The tenant successfully recovered the sale price of the goods from the deceased’s administrators without any investigation of their value at the date of conversion. The central issue in the case concerned whether the claim was time-barred by the statutory remnant of the actio personalis rule laying down a six-month limitation period for an action in tort where the tortfeasor had died. In holding that it was not so time-barred Edmund Davies J reasoned that that limitation period only applied to an action for damages for the tort and not to a quasi-contractual or, as we would now say, restitutionary, remedy. In an important passage he said:

‘A person upon whom a tort has been committed has at times a choice of alternative remedies, even though it is a sine qua non regarding each that he must establish that a tort has been committed. He may sue to recover damages for the tort, or he may waive the tort and sue in quasi-contract to recover the benefit received by the wrongdoer.’23

Turning to the tort of trespass to goods, in Oughton v Seppings24 a sheriff’s officer in executing a writ of fieri facias against a Mr Winslove had seized a horse belonging to the claimant. That horse had subsequently been sold by the sheriff and the proceeds of sale paid (p. 341) to the officer. Again, without any investigation of the loss to the claimant, it was held that he could recover the sale proceeds from the officer in an action for money had and received.

Finally, there is Powell v Rees25 which concerned the tort of trespass to land by the extraction of coal from the claimant’s land. The claimant was held able to evade the actio personalis bar by suing the deceased tortfeasor’s estate in an action for money had and received to recover the sale proceeds of the coal. But this case is somewhat weaker than the above three in that Lord Denman CJ did not seem concerned by the lack of direct evidence of the sale price and also indicated that a compensatory award would have yielded the same sum.

(b)  Account of profits

This is an equitable remedy by which the defendant is required to draw up an account of, and then to pay the amount of, the net profits it has acquired by particular wrongful conduct. The remedy’s label ‘account of profits’ is therefore shorthand for ‘account and award of profits’. This is plainly a restitutionary remedy concerned with the stripping of profits.26 The contrast with compensatory damages was clearly stressed in the typically superb judgment of Windeyer J in the Australian infringement of trade mark case, Colbeam Palmer Ltd v Stock Affiliates Pty Ltd:27

‘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 plaintiff’s loss is not to be measured by the defendant’s gain, or a defendant’s gain by the plaintiff’s 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.’

As yet, an account of profits is only available for a tort if the tort involves an infringement of intellectual property rights,28 whether by the infringement of a patent,29 copyright,30 design right,31 performer’s property right,32 or trade mark,33 or passing off.34 Confinement of this equitable remedy to those torts is explicable historically because they have their roots (p. 342) in equity. But this is not a policy justification and it can be argued that the role of an account of profits should be expanded to reverse gains made by any dishonestly committed tort. Indeed, given that an account of profits is commonplace for the equitable wrong of breach of confidence,35 it surely cannot be long before the question is litigated as to whether an account of profits can be awarded for the tort of privacy, which has grown out of breach of confidence.

Originally the courts would only award an account of profits if ancillary to an injunction. For example, in Smith v London and South Western Rly Co36 and Price’s Patent Candle Co Ltd v Bauwen’s Patent Candle Co Ltd37 it was held that no account of profits could be awarded because, as there would be no further patent infringement, there was no justification for an injunction. But while it is generally the case that an account of profits is awarded in addition to an injunction, this is no longer a requirement. Presumably as with an injunction, traditional equitable defences concerning the claimant’s conduct, such as clean hands and acquiescence, will apply as bars to an account of profits.

There are four remaining issues of importance:

(i)  Innocent wrongdoing

There is an interesting difference between these torts as to whether an account of profits will be refused because the defendant was an innocent wrongdoer. So by the Patents Act 1977, s 62(1), in proceedings for patent infringement, it is a defence to a claim for an account of profits or indeed damages (but not an injunction) that the defendant was not aware, and had no reasonable grounds for supposing, that the patent existed. In other words, a negligence standard is laid down for an account of profits (and damages).

At common law, an account of profits may be ordered for the torts of passing off38 or infringement of trade mark39 although it appears that dishonesty is here a pre-condition of an account of profits40 (albeit not of a claim for damages).41 Windeyer J explained this as follows in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd:42

‘By [the account of profits] 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 knowingly infringing the rights of the proprietor of the trade mark.’

But in contrast to the above are the Copyright, Designs and Patents Act 1988, ss 97(1), 233(1), and 191J(1) whereby, for infringement of copyright, a primary infringement of a design right, and infringement of a performer’s property right respectively, it is a defence to damages but not to an account of profits that the defendant did not know and had no reason to believe that copyright or the design right or performer’s property right subsisted in the work to which the action relates. In other words, an account of profits is awarded on a strict liability basis.

There is no justification for such a difference of approach and the inconsistency should be removed. Whether this should be by adopting the standard of dishonest wrongdoing, as (p. 343) for the common law torts; or negligence, as for patent infringement; or strict liability, as for copyright, primary design infringement, and infringement of performer’s property right, is a difficult policy issue which ultimately rests on the justification for applying restitution as a mid-position between compensation and punishment.

(ii)  Account of which profits?

The courts’ approach shows a veiled awareness that the wrong must have been a factual cause of the profits for which the account is ordered. Slade J affirmed the central principle in the following classic statement in My Kinda Town Ltd v Soll,43 where the defendants were alleged to be liable for passing off by using a name similar to the claimants’ for their own chain of restaurants:

‘The purpose of ordering an account of profits in favour of a successful plaintiff in a passing off case is not to inflict punishment on the defendant. It is to prevent an unjust enrichment of the defendant by compelling him to surrender those … parts of the profits, actually made by him which were improperly made and nothing beyond this.’

It followed that, as the alleged tort comprised confusing the public into thinking the defendants’ restaurants were the claimants’, the profits to be accounted for were only those additional profits caused by that confusion, and not all the profits made by the defendants from those restaurants.44

Again, in relation to infringement of a trade mark, it is not all the profits from the sale of infringing goods that are gained by the infringement and must be accounted for: rather it is only those made because the goods were sold under the trade mark. As Windeyer J said in Colbeam Palmer v Stock Affiliates Pty Ltd,45 ‘The profit for which the infringer of a trade mark must account is thus not the profit he made from selling the article itself but … the profit made from selling it under the trade mark.’

Similarly, as Lord Watson pointed out in dicta in United Horse-Shoe & Nail Co Ltd v Stewart & Co,46 it ‘would be unreasonable to give the patentee profits which were not earned by the use of his invention’. So where the patent infringement comprises using a particular means of manufacturing goods, but there are other means, the profits to be accounted for are those made by using that particular means; that is, as suggested in Siddell v Vickers,47 one should compare the profits actually made with those that would have been made if the next most likely means of manufacture had been adopted.

In Celanese International Corpn v BP Chemicals Ltd48 Laddie J controversially held that, in assessing the sum to be awarded under an account of profits for patent infringement, no sum could be awarded if no profits (but instead losses) were made (even though the losses would have been greater but for the infringement). This is closely tied to the view that one cannot award an account of profits for an ‘expense saved’49 and, while unusual, there seems no reason in principle why that should be ruled out (although it will commonly be unrealistic to imagine that the defendant would have acquired the same benefit (p. 344) from a third party). After all, in some situations, the expense saved precisely is the profit made by the wrong.50 Moreover, it would be most odd if a defendant could be stripped of net profits but could not be deprived of an expense saved which would appear to represent a less draconian award. In relation to the equitable wrong of breach of confidence, Lord Denning thought that the expense saved of acquiring the information elsewhere (or from the claimant), depending on how special the information was, should be recoverable and clearly saw this as a less extreme remedy than stripping all the defendant’s profits made by the wrong.51 Ideally one should recognize that ‘stripping’ the expense saved is a useful mid-position to stripping all net profits: and that would appear to have been a role that was previously filled by ‘negotiating damages’. However, that role appears to have been closed off by the compensatory analysis of negotiating damages favoured in Morris-Garner v One Step (Support) Ltd.52

In the Celanese case Laddie J also reasoned that, while causation was important, so that the profits must be ones made by the infringement, it was inappropriate to consider what profits the defendant would have made had it adopted the most likely non-infringing method of production.53 On the face of it, this appears to contradict causation54 but it may perhaps be justified in most situations as rendering the calculation of the account of profits more straightforward. An alternative approach might be to switch the burden of proof so that it would be for a defendant to prove the profits that it would have been made even if no wrong had been committed.55 But in the context of an account of profits being awarded for the equitable wrong of dishonest assistance, the High Court of Australia in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd56 has reasoned that, on the assumption that the account of profits is being given where the defendant has been dishonest, there is good reason in terms of deterrence not to allow the defendant to use such an argument to reduce the profits that must be disgorged. It can also be argued that, beyond applying factual cause, a court should restrict an account of profits by making an allowance to take into account the skill and effort expended by the defendant to make the profit. But in contrast to cases on an account of profits for equitable wrongs, there has as yet been no such restriction applied to an account of profits for a tort,57 perhaps because the tort in issue has generally been intentional.

(iii)  Difficulty of an account of profits

A point emphasised in many of the cases, particularly those of the nineteenth century, in which an account of profits has been ordered is the difficulty of working out the profits the defendant has wrongfully acquired. For example, in Price’s Patent Candle Co Ltd v Bauwen’s (p. 345) Patent Candle Co Ltd58 Sir Page Wood V-C said, ‘… the questions involved in taking accounts of the particular instances in which patents have been infringed, and of the profits thereby made, are questions of great nicety and difficulty and never tend to any satisfactory result.’59 But particularly where all profits on the manufacture and sale of certain goods have to be accounted for, it is hard to see why this is regarded as that difficult. Even where only some of the profits from sales of goods have to be accounted for, it is not clear why it is thought more difficult to work out the profits the defendant has made from his wrong, than it is to calculate compensatory damages for, for example, the profits the claimant has lost as a result of the wrong.

Perhaps the explanation for this emphasis on difficulty is that traditionally the courts have taken the view 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, whereas it has been accepted that damages can be calculated in a rough and ready manner. But there is no reason why an account of profits should not also be roughly rather than precisely calculated and in support of this are Slade J’s comments in My Kinda Town Ltd v Soll:60

‘… the general intention of the Court in making the order [of an account of profits] … has been to achieve a fair apportionment, so that neither party will have what justly belongs to the other. What will be required on the inquiry, if it has to be pursued, will not be mathematical exactness, but only a reasonable approximation.’

Similarly in the breach of contract case of Attorney-General v Blake61 Lord Nicholls said: ‘Despite the niceties and formalities once associated with taking an account, the amount payable under an account of profits need not be any more elaborately or precisely calculated than damages.’

(iv)  Account of profits and damages

It has been laid down that a claimant cannot both be awarded damages and an account of profits.62 In Neilson v Betts63 Lord Westbury explained the rule on the ground that, ‘The two things are hardly reconcilable, for if you take an account of profits you condone the infringement’. But this reasoning is unconvincing and it has been restrictively interpreted in Codex Corpn v Racal-Milgo Ltd,64 where the actual decision was that the taking of an account of profits for infringement of patent does not amount to a ‘franking’ of the defendant’s products so as to prevent future actions for patent infringement. Indeed Lord Westbury’s view is reminiscent of the argument rejected in United Australia Ltd v Barclays Bank Ltd65 that, having ‘waived the tort’ and sued for an action for money had and received, (p. 346) the claimant cannot switch to claiming damages for conversion if judgment on that prior action is unsatisfied.

Although that reasoning is unconvincing, the rule that a claimant cannot be awarded both compensation and restitution for a wrong may be thought to be justified on the basis that it prevents double recovery or ‘inconsistency’.66 For example, if D, by committing a tort against C has made a net gain of £2,000 and by the same tort has caused loss to C of £5,000, the effect of requiring D to pay C £7,000 would be that C is neither just compensated for its loss nor is D just stripped of its wrongly acquired gain. An award of £7,000 would therefore appear to be inconsistent with either of the remedial purposes being pursued and would constitute double recovery.

On the other hand, there would appear to be no objection to a combination of compensation and restitution provided one takes account of the other. So the correct award of £5,000 in the above example could be justified as an award of restitution (£2,000) plus partial compensation (£3,000).

At present the law requires a claimant to make an election or choice between these so-called ‘inconsistent’ remedies. That election need not be made until judgment and even then it can be changed if the judgment is unsatisfied.67

A requirement of election between ‘inconsistent’ remedies saves the court from having to become embroiled in the issue of the extent to which an award of both restitution and compensation would entail ‘double recovery’. It may also remove the risk of defendants being pressurised into paying inappropriate measures of recovery. The disadvantage of requiring an election is that it is conceivable that a claimant may be deprived of its full entitlement by making an inappropriate election although normally a claimant will make the right choice by electing the remedy which, on the facts, yields the higher measure of recovery. The chance of injustice to claimants (by choosing a lower measure) has been further reduced by the decision in Island Records Ltd v Tring International Plc68 to the effect that a claimant is entitled to defer election until after an inquiry as to the amount of profits.

(c)  The relationship with punitive damages

In considering the extent to which restitution can be awarded for a tort, it is important to bear in mind the second of the three categories of punitive (otherwise known as exemplary) damages recognised in Rookes v Barnard.69 This category is where ‘the defendant’s conduct has been calculated to make a profit for himself which may well exceed the compensation payable to the plaintiff’. Punitive damages go beyond restitution. But if the courts are willing to go to the lengths of punishing the profit-seeking deliberate tortfeasor, it arguably follows, and was accepted by the Law Commission,70 that they ought to be prepared to go to the lesser length of awarding a restitutionary remedy stripping the deliberate tortfeasor of ill-gotten gains.

(p. 347) (d)  Some significant anti-restitution cases?

As a contrast to the picture that has so far been presented, which shows restitution (whether through an award of money had and received or an account of profits) being awarded for various torts, we must now consider five Court of Appeal decisions that stand as possible obstacles to the full or wide acceptance of restitution as a remedial measure for a tort.

(i)  Phillips v Homfray71

In this case, the deceased had trespassed by using roads and passages under the claimants’ land to transport coal. In an earlier action the claimants had won a judgment for ‘damages’ to be assessed against the then living tortfeasor.72 After his death, the question at issue was whether the claimants could treat the judgment for damages for use of their land as one for a restitutionary remedy which would survive against the deceased’s executors despite the actio personalis rule. The majority held not on the ground that for a restitutionary remedy, at least one that is to survive against the deceased’s executors, it is necessary for the gain made by the tortfeasor to comprise the claimant’s property or the proceeds of that property. On the facts that was not so: the deceased had gained by saving himself the expense of not paying the claimant for using the underground roads or alternatively by not paying for other methods of transporting the coal. Baggallay LJ, in a powerful dissenting judgment, could not see why the type of benefit should matter. He said:

‘I feel bound to say that I cannot appreciate the reasons upon which it is insisted that although executors are bound to account for any accretions to the property of their testator derived directly from his wrongful act, they are not liable for the amount or value of any other benefit which may be derived by his estate from or by reason of such wrongful act.’73

This case can be, and has been, analysed in many different ways. Goff and Jones in their first three editions regarded it as an unfortunate decision on restitution for the tort of trespass to land which should be overruled. They wrote, ‘In our view the principle of Baggallay LJ’s dissent should be adopted and Phillips v Homfray overruled.’74 Underpinning this view was that, while the issue in point was whether an action could be brought against the deceased’s executors and was therefore bound up with the actio personalis rule which no longer applies, the reasoning appeared to be also directed to claims against the wrongdoer himself. For example, Bowen LJ said, ‘The true test to be applied in the present case is whether the plaintiffs’ claim against the deceased … belongs to the category of actions ex delicto or whether any form of action against the executors of the deceased, or the deceased man in his lifetime, can be based upon any implied contract or duty.’75

Birks argued that the case presents no obstacle to restitution for wrongdoing because, given the actio personalis bar to tort actions then existing, the case could only be concerned with the cause of action of unjust enrichment (ie ‘alternative analysis’).76 But while it might be possible to analyse the decision as being concerned purely with the cause of action of unjust enrichment, the judgments seemed principally geared towards enrichment by wrongdoing.

(p. 348) On another view, favoured more recently by Goff and Jones77 and in a forceful article by Swadling, while the decision does deal with restitution for wrongs, it should be regarded as posing no difficulty for the modern law because of the abolition of the actio personalis rule. Swadling persuasively contends that, taking into account the earlier 1871 decision (which he calls Phillips v Homfray (No 1)), the 1883 decision (which he calls Phillips v Homfray (No 2)) was not denying that a court can award restitution for negative benefits against a living trespasser.78 He writes:

Phillips & Homfray (No 2) is not the anti-restitutionary case it is painted to be. It should not be overruled, or banished to a dark corner of our law, but instead set out in lights. It is a decision concerned only with the operation of the maxim actio personalis moritur cum persona, and therefore tells us nothing of the restitutionary liability of living wrongdoers. And when read in conjunction with Phillips v Homfray (No 1), it is in fact authority against the very proposition for which it is said to stand, namely, that a restitutionary claim in respect of the wrong of trespass to land yields only positive benefits, for in the first stage of the litigation Stuart V-C at first instance, and Lord Hatherley LC on appeal, allowed a restitutionary claim for expense saved by the then living defendants … The only thing which needs to be buried is the myth in Phillips v Homfray, not the decision itself.’79

Even if one treats Phillips v Homfray as a problem case it must not be forgotten that it was not totally anti-restitution in that it indisputably did recognise that restitution could be given for a tort where the gain comprised the claimant’s property or its proceeds.80 It was therefore implicit in the majority’s reasoning that the first part of the ‘damages’ to be assessed for the value of the coal taken (which the Court of Appeal in the later Phillips v Homfray appeal81 construed as being for an equitable account of profits so that no interest could be added) was maintainable against the deceased’s executors despite the actio personalis rule.

Moreover, it is noteworthy that the decision has had no impact outside actions for money had and received: the granting of an account of profits for intellectual property torts accepted at common law and in statutes conflicts with, while ignoring, the Phillips v Homfray restriction.

(ii)  Stoke-on-Trent City Council v W & J Wass Ltd82

Here the defendants had deliberately committed the tort of nuisance by operating a market within a distance infringing the claimant’s proprietary market right. The claimant was granted an injunction to restrain further infringement of its right. On the question of damages it was accepted by the claimant that it had not suffered any loss, in the sense of loss of custom. But at first instance Peter Gibson J awarded damages on the basis of an appropriate licence fee that the claimant could have charged the defendant for lawful operation of its market: that is, he awarded what are now called ‘negotiation damages’. After Morris-Garner v One Step (Support) Ltd83 these should be viewed as compensatory damages. In contrast, (p. 349) the Court of Appeal restricted the claimant to nominal damages. This was odd given that negotiation damages have classically been awarded for the infringement of proprietary rights and this was just such a case. The tort in question was a proprietary tort. However, for the purposes of this chapter, the most important feature of the case is that the Court of Appeal ruled out any idea that there could be a restitutionary remedy for a tort. Most alarming was that the whole question was approached as if only compensatory damages could be awarded. It was only at the very end of Nourse LJ’s 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 edn), 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.’84

This is to ignore the cases that we have earlier explored in this chapter. Unfortunately, as we shall see, rather than being put to one side and distinguished as an unusual case, Wass has been allowed to exercise a restrictive influence in some subsequent decisions.

(iii)  Halifax Building Society v Thomas85

The importance of this case is that it appears to cast doubt on whether restitution is available for the tort of deceit. The defendant fraudulently misrepresented his identity and creditworthiness to obtain a loan from the claimant to finance the purchase of a flat. The loan was secured by a mortgage over the flat. When the defendant defaulted on the repayments, the claimant exercised its right to sell off the flat. The proceeds of sale exceeded the loan. The claimant sought a declaration that it was entitled to keep all the proceeds of sale (ie including the surplus of £10,504.90 plus interest) as restitution for the tort of deceit. If made out, such a restitutionary claim would have defeated the Crown’s competing claim to confiscate the surplus in execution of a criminal confiscation order made when the defendant was found guilty of conspiring to obtain mortgage advances by deception.

The Court of Appeal held that the claimant was not entitled to restitution (whether personal or proprietary) for the tort of deceit.86 The reasoning was that this was not a proprietary tort case. Nor did it involve a breach of fiduciary duty. Moreover, the claimant had affirmed the loan and mortgage, rather than rescinding it for misrepresentation, and had recovered all that, as a secured creditor, it was contractually entitled to under the loan agreement.

One may interpret this case as a significant block on restitution for a personal, non-proprietary tort. However, Peter Gibson LJ did stress that it was ‘in the circumstances of the present case’,87 where the claimant had affirmed the contract of loan, that restitution should be denied. Moreover, it can be argued that, as the criminal convictions and confiscation order would ensure that the defendant would not profit from his wrong, there was no work needing to be done by the civil law of restitution.

(p. 350) (iv)  Forsyth-Grant v Allen88

The claimant owned a hotel. The defendant built a pair of semi-detached houses on the land adjoining the hotel which infringed the claimant’s right to light. The defendant was aware of this and sought to negotiate a way round it but the claimant unreasonably refused to communicate with the defendant or his architect. The claimant then sought damages or an account of profits for the tort of nuisance.

At first instance it was decided that the loss to the claimant as a result of the infringement of its right to light was £1,848. That sum was awarded as damages. The net profit to the defendant as a result of the nuisance was assessed at £6,767 being the profit that it would have had to forgo had the building had less floor space so as to avoid infringing the claimant’s right to light. However, the judge at first instance held that an account of profits could not here be awarded.89 That reasoning was upheld by the Court of Appeal. The majority (Patten J and Mummery LJ) laid down that an account of profits cannot be awarded for the tort of nuisance.90 Wass was regarded as supporting that and it was reasoned that, even if the contract case of Attorney-General v Blake91 were applicable to an account of profits in tort, the approach in that case required exceptional circumstances as a condition for restitution and there were none here. Toulson LJ, while agreeing with the result, took a slightly more flexible approach and was willing to accept that there might be cases where an account of profits could be awarded for the tort of nuisance: but here an account of profits would in any event have been inappropriate because of the claimant’s own uncooperative attitude in refusing to communicate with the defendant.

(v)  Devenish Nutrition Ltd v Sanofi-Aventis SA92

The defendants, who were the manufacturers of vitamins for animal feed, had been operating an illegal price-fixing cartel. As a consequence, the claimants had had to pay higher prices than they should have done to purchase those vitamins. The European Commission had imposed very significant fines on the defendants for operating the cartel. The claimants now sued the defendants in tort for breach of the statutory duty laid down in Article 81 of the EC Treaty prohibiting such cartels. On a preliminary issue the question was whether the claimants were entitled to restitution for the tort rather than the usual compensation. This was important for the claimants principally because it was thought likely that at least the direct purchasers of the vitamins would be regarded as having avoided their loss by absorbing the higher prices charged in the prices they had themselves charged to their customers.

It was held by a majority of the Court of Appeal (Arden and Tuckey LJJ) that a restitutionary award could not be made for the tort of breach of statutory duty in issue in this case because it was not a proprietary tort. Wass was held to be binding authority for refusing restitution except for proprietary torts; and that case was thought not to have been overruled by the wider reasoning of the House of Lords in Attorney-General v Blake. Even if incorrect on that, a restitutionary award could only be made if there were exceptional circumstances of the kind described in Blake and here that was not so because compensatory damages were an adequate remedy.

(p. 351) While agreeing with the result—because he did not think there was any good reason on these facts to extend the law on restitution for torts, especially where the claimant had passed on its loss to its customers—Longmore LJ disagreed with the majority that the Wass case stood as a blocking authority. He said: ‘I do not consider that [Wass] is authority for the proposition that the categories of cause of action in which it is permissible to order an account of profits are necessarily confined to tortious claims for breach of a proprietary right.’93

Longmore LJ should be supported on this. With respect, the majority’s approach to the Wass case is flawed because, in particular, Wass concerned a proprietary tort (the tort of private nuisance).94 Therefore, the restriction on restitution in that case cannot have had anything to do with restitution being limited to proprietary torts. It is also arguable that, even if that analysis was correct, the reasoning of the House of Lords in Attorney-General v Blake, albeit a contract case, has subsequently moved the law of restitution on beyond a restriction to proprietary wrongs.

(e)  Conclusion

It is submitted that, despite those five significant anti-restitution cases, the main picture emerging from all the cases is that, at least for proprietary torts, restitution (reversing the defendant’s wrongful gains) is an available remedial response. That is, taking both types of restitutionary remedy together (whether an award of money had and received or an account of profits) the torts for which restitution has been awarded have involved interference with the claimant’s property, whether that property be real or personal or intellectual. The cases therefore reveal a judicial desire firmly to deter even innocent interference with the claimant’s property; that is, merely to compensate for any loss caused appears to be regarded as insufficient to deter that interference. This seems sensible. Applying Jackman’s theory, restitution is justified as a means of deterring harm to the ‘facilitative institution’ of private property.95

A subsidiary feature exhibited in a few of the account of profits cases (eg for passing off and infringement of trade mark) is that the tort must be committed intentionally if restitution is to be awarded. It can be strongly argued (not least if one takes into account the contract case of Attorney-General v Blake)96 that this category should be expanded97 so that restitution should be awarded to reverse gains made by, eg, intentionally inducing a breach of contract or an intentional libel.98 This is particularly so, if the courts can rid themselves of the former emphasis on an account of profits being mathematically exact. Indeed punitive damages can be awarded for these torts under the category of cynically exploiting wrongdoing to make a profit99 and, since stripping the defendant of its unjust profits by restitution is less drastic than punishment,100 it is arguable that restitution should follow on the reasoning that the greater should include the lesser. This was supported by the Law Commission. Irrespective of any other power to award restitution for torts (eg for (p. 352) proprietary torts) the Commission recommended that a claimant may be awarded restitution for any tort if the defendant’s conduct showed a deliberate and outrageous disregard of the claimant’s rights.101

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

‘… 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.’

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:

‘An account of profits will be appropriate only in exceptional circumstances. Normally the remedies of damages, specific performance and injunction, coupled with the characterisation of some contractual obligations as fiduciary, will provide an adequate response to a breach of contract. It will be only in exceptional cases, where those remedies are inadequate, that any question of accounting for profits will arise. No fixed rules can be prescribed. The court will have regard to all the circumstances, including the subject matter of the contract, the purpose of the contractual provision which has been breached, the circumstances in which the breach occurred, the consequences of the breach and the circumstances in which relief is being sought. A useful general guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit.’128

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:

‘the fact that the breach was cynical and deliberate; the fact that the breach enabled the defendant to enter into a more profitable contract elsewhere; and the fact that by entering into a new and more profitable contract the defendant put it out of his power to perform his contract with the plaintiff.’129

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.

Footnotes:

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’ [1989] 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’ [2007] 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 [2018] UKSC 39, [2018] 3 WLR 652). For limitation periods for restitution for torts or breach of contract, see pp 703–705 of the same title.

4  [2018] UKSC 20, [2018] 2 WLR 1353.

5  Above, pp 324–326.

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  [2018] UKSC 20, [2018] 2 WLR 1353. See above, ch 18.

10  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 [1967] 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.

21  [1967] 1 QB 407.

22  [1941] AC 1.

23  [1967] 1 QB 407, at 417.

24  (1830) 1 B & Ad 241.

25  (1837) 7 Ad & El 426.

26  Chadwick LJ’s obiter dicta in WWF-World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2007] EWCA Civ 286, [2008] 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 [2012] EWCA Civ 1419, [2013] 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 [1990] 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).

32  ibid, s 1911(2).

33  Edelsten v Edelsten (1863) 1 De GJ & SM 185; Slazenger & Sons v Spalding & Bros [1910] 1 Ch 257; Hollister Inc v Medik Ostomy Supplies Ltd [2012] EWCA Civ 1419, [2013] Bus LR 428.

34  Lever v Goodwin (1887) 36 Ch D 1; My Kinda Town Ltd v Soll [1982] FSR 147; rvsd on liability [1983] RPC 407.

35  See below, ch 26.

36  (1854) Kay 408.

37  (1858) 4 K & J 727.

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 [1982] FSR 147, rvsd on liability [1983] RPC 407.

39  Edelsten v Edelsten (1863) 1 De GJ & Sm 185; Slazenger & Sons v Spalding & Bros [1910] 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 [1994] RPC 279.

42  (1968) 122 CLR 25, at 34.

43  [1982] FSR 147, at 156; rvsd on liability [1983] RPC 407. See also Potton Ltd v Yorkclose Ltd [1990] 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.

47  (1892) 9 RPC 152.

48  [1999] RPC 203, esp at [127].

49  In Lord Nicholls’s words in Attorney-General v Blake [2001] 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.

51  Below, p 523.

52  [2018] UKSC 20, [2018] 2 WLR 1353: see above, ch 18.

53  [1999] RPC 203, esp at [39]–[41].

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 [2012] EWCA Civ 1419, [2013] 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 [2017] EWHC 932 (IPEC), [2017] FSR 43.

56  [2018] 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 [1982] RPC 109, at 132 (innocent copyright infringement).

58  (1858) 4 K & J 727.

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  [1982] FSR 147, at 159. See also Potton Ltd v Yorkclose Ltd [1990] FSR 11.

61  [2001] 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 [1996] 1 WLR 1256, noted by P Birks, ‘Inconsistency Between Compensation and Restitution’ (1996) 112 LQR 375; Spring Form Inc v Toy Brokers Ltd [2002] FSR 276, noted by L Bently and C Mitchell, ‘Combining Money Awards for Patent Infringement’ [2003] RLR 79; Hollister Inc v Medik Ostomy Supplies Ltd [2012] EWCA Civ 1419, [2013] Bus LR 428, at [54]–[56]. See analogously United Australia Ltd v Barclays Bank Ltd [1941] 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 [1979] AC 374; Tang Min Sit v Capacious Investments Ltd [1996] 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.

64  [1984] FSR 87.

65  [1941] AC 1.

66  See above, pp 13–15.

67  United Australia Ltd v Barclays Bank Ltd [1914] AC 1; Tang Min Sit v Capacious Investments Ltd [1996] AC 514.

68  [1996] 1 WLR 1256.

69  [1964] 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.

71  (1883) 24 Ch D 439.

72  (1871) 6 Ch App 770.

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.

81  [1892] 1 Ch 465.

82  [1988] 1 WLR 1406.

83  [2018] UKSC 20, [2018] 2 WLR 1353. See above, ch 18.

84  [1988] 1 WLR 1406, at 1415.

85  [1996] Ch 217.

86  At first instance in Murad v Al-Saraj [2004] EWHC 1235, at [342]–[347] Etherton J appeared to accept that an account of profits can be awarded for the tort of deceit but in the Court of Appeal, [2005] EWCA Civ 959, [2005] WTLR 1573, esp at [46], the award was recast as being a conventional award for breach of fiduciary duty.

87  [1996] Ch 217, at 227.

88  [2008] EWCA Civ 505, [2008] 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 [2008] EWCA Civ 505, [2008] Env LR 41, at [32].

91  [2001] 1 AC 268. See below, pp 356–358.

92  [2008] EWCA Civ 1086, [2009] 3 WLR 198. For an excellent case-note, see O Odudu and G Virgo, ‘Remedies for Breach of Statutory Duty’ [2009] CLJ 32.

93  [2008] EWCA Civ 1086, [2009] 3 WLR 198, at [145].

94  [1998] 1 WLR 1406, at 1410.

95  I Jackman, ‘Restitution for Wrongs’ [1989] CLJ 302.

96  [2001] 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.

99  Below, pp 364–367.

100  Cassell & Co Ltd v Broome [1972] 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’ [1987] 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  [1904] 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.

108  [2001] 1 AC 268.

109  (1899) 1 F 39.

110  [1977] 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 [2001] 1 AC 268, at 286, and, especially clearly, by Lord Reed in Morris Garner v One Step (Support) Ltd [2018] UKSC 20, [2018] 2 WLR 1353, at [80].

113  [1993] 1 WLR 1361. See R O’Dair, ‘Remedies for Breach of Contract: A Wrong Turn’ [1993] RLR 31; A Burrows, ‘No Restitutionary Damages for Breach of Contract’ [1993] LMCLQ 453.

114  [1993] 1 WLR 1361. See R O’Dair, ‘Remedies for Breach of Contract: A Wrong Turn’ [1993] RLR 31; A Burrows, ‘No Restitutionary Damages for Breach of Contract’ [1993] LMCLQ 453.

115  G Jones, ‘The Recovery of Benefits Gained from a Breach of Contract’ (1983) 99 LQR 443, 459.

116  So 486 (1891).

117  P Birks, ‘Restitutionary Damages for Breach of Contract: Snepp and the Fusion of Law and Equity’ [1987] LMCLQ 421.

118  [1977] Ch 106.

119  Birks relied on Reading v Attorney-General [1951] AC 507; Reid-Newfoundland Co v Anglo-American Telegraph Ltd [1912] AC 555; Lake v Bayliss [1974] 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’ [1989] 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.

123  Below, pp 413–414.

124  [2001] 1 AC 268. For a useful case-note see D Fox, ‘Restitutionary Damages to Deter Breach of Contract’ [2001] 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)’ [2003] CLJ 605.

125  Lord Nicholls did not like the term ‘restitutionary damages’: [2001] 1 AC 268, at 284.

126  ibid, at 283.

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 [2018] UKSC 20, [2018] 2 WLR 1353: see above, ch 18.

128  [2001] 1 AC 268, at 285.

129  [2001] 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  [1993] 1 WLR 1361. See above, p 354.

132  This may be thought to derive support from Lane v O’Brien Homes Ltd [2004] 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 [2018] UKSC 20, [2018] 2 WLR 1353: see above, ch 18.

133  [1912] AC 555. See also Lake v Bayliss [1974] 1 WLR 1073 (breach of a contract to sell land); and CMS Dolphin Ltd v Simonet [2001] 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.

134  [1951] 2 All ER 641.

135  [2001] All ER (D) 324 (Nov). See also the comments of the Supreme Court of Canada in Bank of America Canada v Mutual Trust Co [2002] 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 [2016] EWHC 162 (Pat), [2016] RPC 15.

137  See, eg, AB Corpn v CD Company, The Sine Nomine [2002] 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.