1 Birks, P.B.H., An Introduction to the Law of Restitution (Oxford 1985)Google Scholar.

2 Birks, P., “Misnomer” in Cornish, W. et al. (eds.), Restitution: Past, Present & Future (Oxford 1998)Google Scholar, 1; cf. A. Tettenborn, “Misnomer: A Response” ibid., at p. 31; M. McInnes, “Restitution, Unjust Enrichment and the Perfect Quadration Thesis” [1999] Restitution L. Rev. 118; A. Burrows, “Quadrating Restitution and Unjust Enrichment: A Matter of Principle?” [2000] Restitution L. Rev. 257. See also Birks, P., “Unjust Enrichment and Wrongful Enrichment” (2001) 79 Texas L. Rev. 1767Google Scholar.

3 That error has occurred in Canada: LAC Minerals Ltd. v. International Corona Resources Ltd. (1989) 61 D.L.R. (4th) 14 (S.C.C.).

4 Jones, G., Goff & Jones: The Law of Restitution 6th edn. (London 2002), pp. 4143Google Scholar; Burrows, A., The Law of Restitution 2nd edn. (London 2002), pp. 3142Google Scholar; Tettenborn, A., The Law of Restitution in England and Ireland 3rd edn. (London 2002), pp. 1820Google Scholar.

5 A trust may arise if the third party does everything possible to confer a gift upon the claimant, but, before the gift is perfected by possession, the defendant acquires legal title to the property: Re Rose [1952] Ch. 78 (C.A.). So too, in a case of secret trust, if the defendant obtains property upon the third party's death, having promised the deceased that the benefit would be turned over to the claimant: Ottaway v. Norman [1972] Ch. 698. And again if, having received an identified fund from the third party with instructions to turn the benefit over to the claimant, the defendant “attorns” by informing the claimant that he will abide by that undertaking. At the moment of attornment, title becomes vested in the claimant, either equitably or perhaps legally: Goff & Jones, ibid., ch. 28.

6 Arris v. Stukely (1677) 2 Mod. 660, 86 E.R. 1060; King v. Alson (1848) 12 Q.B. 971, 116 E.R. 1134.

7 Lyell v. Kennedy (1889) 14 App. Cas. 437; Official Custodian for Charities v. Mackey (No. 2) [1985] 1 W.L.R. 1308 (Ch. D.).

8 Jacob v. Allen (1703) 1 Salkeld. 27, 91 E.R. 26; Yardley v. Arnold (1842) C. & M. 434, 174 E.R. 577.

9 Khan v. Permeyer [2001] B.I.P.R. 95 (C.A.). It sometimes is said that restitution may be available for the purpose of rectifying a gift. A third party prepares a deed with the intention of donating property to the claimant. The donor dies without realising that, by mistake, the deed actually worked in favour of the defendant. Dictum in Lister v. Hodgson suggests that the claimant is entitled to restitution from the defendant: (1867) L.R. 4 Eq 30, 34; see also M’Meachan v. Warburton [1896] 1 I.R. 435, 441. More difficult still, interceptive subtraction may lie at the heart of the personal claim in Ministry of Health v. Simpson: [1951] A.C. 251 (H.L.); L.D. Smith, “Three-Party Restitution: A Critique of Birks’ Theory of Interceptive Subtraction” (1991) 11 O.J.L.S. 481, 497-500.

10 Introduction, note 1 above, at pp. 133-134.

11 The Canadian position appears to be much broader. The leading case of LAC Minerals Ltd. v. International Corona Resources Ltd. suggests that restitution is available as long as the defendant received from a third party a benefit that the claimant otherwise “would probably” have acquired: (1989) 61 D.L.R. (4th) 14, 45 (S.C.C.). There is, of course, a substantial difference between a “certainty” and a “probability”.

12 Virgo, G., The Principles of the Law of Restitution (Oxford 1999), pp. 109113Google Scholar.

13 Grantham, R.B. & Rickett, C.E.F., Enrichment & Restitution in New Zealand (Oxford 2000), p. 20Google Scholar.

14 [1985] 1 W.L.R. 1308, 1314-1315.

15 [1997] Ch. 159 (C.A.).

16 Birks, P., “At the Expense of the Claimant: Direct and Indirect Enrichment in English Law” in Johnston, D. and Zimmerman, R. (eds.), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge 2001), 493, 509Google Scholar. See also Birks, P. & Mitchell, C., “Restitution” in Birks, P. (ed.), English Private Law (Oxford 2000), vol. 2, para. 15.19Google Scholar.

17 Bankruptcy Act 1914, s. 37(1); cf Insolvency Act 1986, s. 278.

18 Birks, P., “On Taking Seriously the Difference Between Tracing and Claiming” (1997) 11 Trust Law Intl. 1Google Scholar; D. Fox, “Common Law Claims to Substituted Assets” [1997] C.L.J. 30; N.H. Andrews & J. Beatson, “Common Law Tracing: Springboard or Swan-Song?” (1997) 113 L.Q.R. 21; Davern, R., “Common Law Tracing, Profits and the Doctrine of Relation Back” [1997] Restitution L. Rev. 92Google Scholar; R.B. Grantham & C.E.F. Rickett, “Disgorgement for Unjust Enrichment?” [2003] C.L.J. 159; Worthington, S., “Justifying Claims to Secondary Profits” in Schrage, E.J.H. (ed.), Unjust Enrichment and the Law of Contract (The Hague 2001), 451Google Scholar.

19 Although Nourse L.J. agreed in result, he did so on the assumption that the trustee had sued Mrs. Jones for money had and received: [1997] Ch. 159, 172. Birks prefers that brief judgment to the much more extensive reasons provided by Millett and Beldam LL.J.: Birks, P., “Property and Unjust Enrichment: Categorical Truths” [1997] New Zealand L. Rev. 623, 647–648Google Scholar.

20 [1997] Ch. 159, 168.

21 Millett L.J.'s comments regarding unjust enrichment are best interpreted as being preventative. The fund held by Raphaels belonged to the trustee. If Mrs. Jones received payment in a way that reduced Raphaels’ liability on the chose in action, she would be unjustly enriched at the trustee's expense.

22 [1997] Ch. 159, 170. In Foskett v. McKeown, the House of Lords similarly held that proprietary rights in the traceable proceeds of an asset are a function of the law of property, rather than the law of unjust enrichment: [2000] A.C. 51. Cf. P. Birks, “Property, Unjust Enrichment and Tracing” [2001] C.L.P. 231; A. Burrows, “Proprietary Restitution: Unmasking Unjust Enrichment” (2001) 117 L.Q.R. 412.

23 Ibid. Birks rejects that conclusion on the basis that it amounts to “a vindicatio, leading into a declaration of entitlement”, which is a species of claim that is “unknown to the common law”: “Property and Unjust Enrichment” note 19 above, at pp. 646-648. It may well be true that there was no “historical warrant” for Millett L.J.'s approach. But if so, the conclusion to be drawn is that Jones is either novel or incorrect—not that it supports an extension of an action (i.e. unjust enrichment) that was never pled. See also Grantham & Rickett, “Disgorgement”, note 18 above, at pp. 170-173.

24 Grantham & Rickett, “Disgorgement”, note 18 above, at p. 164; Hedley, S. & Halliwell, M. (eds.), The Law of Restitution (London 2002), p. 9Google Scholar; Virgo, Principles, note 12 above, at pp. 95-96; cf. Burrows, The Law of Restitution, above note 4 at p. 28; Burrows “Quadrating Restitution”, note 2 above, at p. 266. Of course, the value of the defendant's restitutionary obligation may be further limited by the operation of a defence, such as change of position.

25 [1997] Ch. 159, 168.

26 Birks & Mitchell, “Restitution”, note 16 above, para. 15.19. For Birks, Jones does double duty. In addition to expanding the scope of interceptive subtraction, it demonstrates that the English action in unjust enrichment, unlike its Canadian counterpart, does not require proof that the claimant suffered a loss equal in value to the defendant's gain: ibid., para. 15.18. Those two propositions appear, however, to be inconsistent. If the defendant is “understood as intercepting wealth already attributed in law” to the claimant, then it seems that the defendant's retention of that wealth does constitute a corresponding deprivation to the claimant, notwithstanding the fact that it was materially acquired from the third party. As Birks previously explained, the whole point of interceptive subtraction is that, despite the lack of a direct nexus, the claimant genuinely “became poorer by the sum in which the defendant was enriched”: Introduction, note 1 above, at pp. 133-134.

27 Courts have refused restitution if, despite the usurpation of an opportunity, there is no necessary equivalence between the amount that the defendant received from the third party and the amount that the claimant otherwise would have received: Official Custodian for Charities v. Mackey (No. 2) [1985] 1 W.L.R. 1308 (Ch. D.); Boyter v. Dodsworth (1796) 6 Term. Rep. 681, 101 E.R. 770.

28 That argument could be made even if, as in Jones itself, the claimant's action is not based on autonomous unjust enrichment. And indeed, Mrs. Jones might have deserved at least remuneration for her services. No such claim was made.

29 There is room for disagreement regarding the calculation of the defendant's counterclaim. The argument presented in the text proceeds by analogy to a situation in which the defendant earns a profit on the basis of money borrowed from the claimant. In that situation, the entire profit belongs to the defendant and the claimant merely receives the return of the principal sum plus compound interest. An alternative analysis, however, might emphasise the claimant's enduring interest in the principal sum. From that perspective, the proper analogy might be a case in which the defendant provides financial advice with respect to the claimant's property. If so, the defendant should not receive the resulting profit, but rather a fee for advice and services. The former view is more consistent with the orthodox position.

30 A claim for compound interest would have to overcome the hurdle of Westdeutsche Landesbank Girozentrale v. Islington LBC [1996] A.C. 669 (H.L.).

31 Mclnnes, M., “The Measure of Restitution” (2002) 52 U. of Toronto L.J. 163, 180-196Google Scholar.

32 That is true even in “strict liability” cases like Rylands v. Fletcher (1868) L.R. 3 H.L. 330. “Strict liability” is an ambiguous phrase. As used in tort, for instance, it refers to a situation in which the defendant is held responsible for non-intentionally and non-carelessly committing a wrong. In such circumstances, the defendant's breach of a primary obligation (e.g. to refrain from a non-natural use of land that results in the escape of a harmful agent) gives rise to a secondary obligation (e.g. to pay compensatory damages to the claimant). As discussed below, however, as used in the law of unjust enrichment, “strict liability” refers to a situation in which the defendant is held responsible even though he did not commit any wrong. There is only ever a primary obligation (i.e. to provide restitution), which the claimant enforces directly against the defendant. There is no question of a breach or a secondary obligation. See generally Austin, J., Lectures in Jurisprudence, 3rd edn. (London 1869), pp. 4447Google Scholar.

33 There are several theories regarding the availability of gain-based relief for civil wrongs. Not all are based on the policy and practical considerations discussed in this paragraph: see e.g. I.M. Jackman, “Restitution for Wrongs” (1989) 48 C.L.J. 402; E.J. Weinrib, “Restitutionary Damages as Corrective Justice” (2000) 1 Theoretical Inquiries in Law 1; M. Mclnnes, “Disgorgement for Wrongs: An Experiment in Alignment” [2000] Restitution L. Rev. 516.

34 Attorney-General v. Guardian Newspapers Ltd. (No. 2) [1990] 1 A.C. 109, 286 per Lord Goff (H.L.).

35 In that sense, compensation tends to be a more effective deterrent because it is measured exclusively by reference to the claimant's loss and without regard to the defendant's gain. Whereas disgorgement merely requires the defendant to give up something to which he was never entitled, compensation generally requires him to satisfy judgment by means of preexisting resources. That analysis sometimes is skewed, however, by evidentiary presumptions that are applied against a wrongdoer. For instance, in the absence of proof to the contrary, a court may presume that all of a tortfeasor's gains are attributable to breach, even though part of the profit in fact is attributable to other factors (e.g. the tortfeasor's own industry): Kull, A., “Restitution's Outlaws” (2002) 78 Chicago-Kent L. Rev. 17Google Scholar.

36 Fuller, L.L. & Perdue, W.J., “The Reliance Interest in Contract Damages” (1936) 46 Yale L.J. 52, 56Google Scholar.

37 Dextra Bank & Trust Co. v. Bank of Jamaica [2002] 1 All E.R. (Comm.) 193 (P.C.); Lipkin Gorman (a firm) v. Karpnale Ltd. [1991] 2 A.C. 548 (H.L.); David Securities Pty Ltd. v. Commonwealth Bank of Australia (1992) 175 C.L.R. 353 (H.C.A.); Storthoaks (Rural Municipality) v. Mobil OH Canada Ltd. (1975) 55 D.L.R. (3d) 1 (s.C.C.).

38 Air Canada v. British Columbia (1989) 59 D.L.R. (4th) 161, 194 (S.C.C.). As usual, the passing on issue arose because the claimant business, having paid an apparent tax to the defendant government, attempted to shift the attendant burden onto its customers in the form of higher prices.

39 Roxborough v. Rothmans of Pall Mall Australia Pty Ltd. (2002) 76 A.L.J.R. 203 (H.C.A.); Commissioner of Revenue (Vic) v. Royal Insurance Australia Ltd. (1994) 182 C.L.R. 51 (H.C.A.); Mason v. New South Wales (1959) 102 C.L.R. 108 (H.C.A.).

40 Kleinwort Benson v. Birmingham C.C. [1996] 4 All E.R. 733 (C.A.); Kleinwort Benson v. South Tyneside MBC [1994] 4 All E.R. 972 (C.A.); cf. Greenwood v. Bennett [1973] 1 Q.B. 195 per Lord Denning M.R. (C.A.); M. McInnes, “At the Plaintiff's Expense: Quantifying Restitutionary Relief” (1998) 57 C.L.J. 472; Grantham & Rickett, “Disgorgement”, note 18 above, at pp. 166-170.

41 As Grantham & Rickett observe, an approach that allows for a windfall “implies a rationale of a claim in unjust enrichment which differs markedly from that usually associated with it, being to achieve restoration of the claimant's wealth position status quo ante”. That gist of that approach “is the stripping away of the defendant's gain. The relief which the claimant will be able to obtain will … extend beyond restoration” “Disgorgement”, note 18 above, at p. 167.

42 That point is obscured in Jones by the fact that, as a result of legislative retroactivity, the trustee was treated as having all along been entitled, as owner, to the entire chose in action, whatever it was worth. As explained below at note 50, however, Birks’ argument does not presume that, as in Jones, the defendant's profit arises as an accretion within the claimant's subsisting ownership. His argument, rather, is that as a result of owning an earning opportunity, the claimant can assert a personal right with respect a separate benefit that the defendant generated from that earning opportunity.

43 Birks, P., “On Taking Seriously the Difference Between Tracing and Claiming” (1997) 11 Trust Law Intl. 1, 67Google Scholar.

44 Henderson v. Merrett Syndicates [1995] 2 A.C. 145 (H.L.).

45 United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1 (H.L.). Of course, the claimant may also use the tort of conversion to claim compensation for his own loss.

46 96 SW 2d 1028 (1936 Ky. C.A.).

47 Birks & Mitchell “Restitution”, note 16 above, para. 15.21.

48 Birks, “Direct and Indirect Enrichment”, note 16 above, at p. 510.

49 Ibid..

50 “Common Law Tracing”, note 18 above, at p. 94. Cf. Grantham & Rickett, “Disgorgement”, note 18 above, at p. 161 (arguing that the response in Edwards was neither restitution nor disgorgement, but rather proprietary—“in effect a declaration that the plaintiff's property rights extend to the fruits of the property”).

51 The analysis would be much different, however, to the extent that the claimant was entitled to proprietary restitution in the form of a resulting trust: Birks, P., “Restitution and Resulting Trusts” in Goldstein, S. (ed.), Equity & Contemporary Legal Developments (Jerusalem 1992)Google Scholar 335; Chambers, R., Resulting Trusts (Oxford 1997)Google Scholar.

52 Birks, “Direct and Indirect Enrichment”, note 16 above, at p. 509.

53 The claimant will, of course, generally choose the option with the biggest payoff.

54 In Strand Electric & Engineering Co. Ltd. v. Brisford Entertainments Ltd., the defendant retained possession, beyond the rental period, of theatre equipment that it had hired from the claimant: [1952] 2 Q.B. 246 (C.A.). The majority of the Court of Appeal awarded a reasonable rental fee as compensation for the claimant's loss. Denning L.J. awarded the same amount as “restitution” (or, more accurately, disgorgement). The claimant had not presented any evidence as to the profit that the defendant earned with the property. Somervell L.J. nevertheless said in dicta that “damages could not … be increased by showing that the defendant had made by his use of the chattels much more than the market rate of hire”: at 252. Denning L.J., in contrast, could “imagine cases where an owner might be entitled to the profits made by a wrongdoer by the use of a chattel”: at 255. In Carr-Saunders v. Dick McNeil Associates Ltd., the defendant developer committed the tort of nuisance by constructing a building in a way that interfered with the claimant's right to light: [1986] 1 W.L.R. 922 (Ch. D.). In discussing the quantification of relief, Millett J. said that he was entitled to take account of the profit that the defendant expected to make from the development. Significantly, however, that fact was relevant only insofar as it, along with many other factors, would have affected negotiations between the parties regarding a reasonable fee. Millett J. did not suggest that the defendant could be required to give up all of his wrongful profit.

55 Oughton v. Seppings (1830) 1 B. & Ad. 241, 109 E.R. 776; Lamine v. Dorrell (1701) 2 Ld. Raym. 1216, 92 E.R. 303; Chesworth v. Farrar [1967] 1 Q.B. 407. If the defendant sold the property at a discount, the claimant is entitled to claim its market value as compensation.

56 Jegon v. Vivian (1871) L.R. 6 Ch. App. 742; Whitwham v. Westminster Brymbo Coal & Coke Co. [1896] 2 Ch. 538 (C.A.); Penarth Dock Engineering Co. Ltd. v. Pounds [1963] 1 Lloyd's Rep. 359. Relief is not denied merely because the defendant's tort was unprofitable: Inverugie Investments Ltd. v. Hackett [1995] 1 W.L.R. 713 (P.C.).

The situation may, however, be changing. In contrast to courts of law, which merely required the defendant to pay a reasonable rental fee for use, courts of equity habitually imposed an account of profits to strip the defendant of his entire ill-gotten gain (e.g. for intellectual property violations and breach of fiduciary duty). In Attorney General v. Blake, Lord Nicholls said that the “difference in remedial response appears to have arisen simply as an accident of history” and not as a matter of principle: [2001] 1 A.C. 268, 280. He then used the broader approach in response to a breach of contract at law.

57 Since the claimant in Edwards enjoyed an earning opportunity despite the factual impossibility of conducting tours himself, Birks’ conception of interceptive subtraction presumably is capable of capturing even those opportunities that, for some reason, the beneficiary under a trust or fiduciary relationship could not actually have exploited: Keech v. Sandford (1726) Sel. Cas. Temp. King 61, 25 E.R. 223; Boardman v. Phipps [1967] 2 A.C. 46 (H.L.); Regal (Hastings) Ltd. v. Gulliver [1967] 2 A.C. 134n (H.L.).

58 [1994] 1 A.C. 324 (P.C.).

59 [1951] A.C. 507 (H.L.).

60 Cf. Lister & Co. v. Stubbs (1890) 45 Ch. D. 1 (C.A.); cf. Jaggard v. Sawyer [1995] 1 W.L.R. 269 (C.A.).

61 [1993] 1 W.L.R. 1361 (C.A.).

62 [1974] 1 W.L.R. 798.

63 Cf. Tito v. Waddell [1977] Ch. 106, 332.

64 [2001] 1 A.C. 268 (H.L.). Subsequent courts have been reluctant to interpret Blake broadly: AB Corp. v. CD Co. (The Sine Nomine) [2002] 1 Lloyd's Rep. 805; World Wide Fund for Nature v. World Wrestling Federation Entertainment Inc. [2002] F.S.R. 32; Experience Hendrix LLC v. PPX Enterprises Inc. [2003] EWCA Civ 323; JS Bloor (Measham) Ltd. v. Calcott [2001] E.W.J. No. 5717 (Ch. D.); cf. Esso Petroleum Co. Ltd. v. Niad Ltd. [2001] E.W.J. No. 5715 (Ch. D.); Hospitality Group Pty Ltd. v. Australian Rugby Union Ltd. [2001] F.C.A. 1040 (Aust. F.C.).

65 Adras Building Material Ltd. v. Harlow & Jones GmbH [1995] Restitution L. Rev. 235, 270 (Israel SC); Friedmann, D., “Restitution of Property Obtained Through the Appropriation of Property or the Commission of a Wrong” (1980) 80 Columbia L. Rev. 504, 513Google Scholar; Smith, L., “Transfers” in Birks, P. and Pretto, A. (eds.), Breach of Trust (Oxford 2002) 111, 112-119Google Scholar.

66 Query whether the same might be true even in Blake. There was, of course, no realistic possibility of an earning opportunity in that case. The Crown never would have allowed George Blake to buy his way out of his contractual obligation. (Interestingly, however, despite having advance notice of publication, the Attorney General did not take action until it subsequently discovered the size of Blake's advance on royalties: £150,000.) But the same is true in Wrotham Park. The claimant felt honour-bound to uphold the restrictive covenant. It never would have sold out. similarly, perhaps, in Edwards. The claimant sought and received both an account of profits and an injunction to prevent future trespass. Granted, it may have requested the injunction in order to enhance its bargaining position, but there is no suggestion in the judgment that the result would have been any different if Mr. Lee had been as firm as the claimant in Wrotham Park. Finally, it would be odd, as a matter of practical justice, if Birks’ conception of interceptive subtraction favoured the commercially-minded over the principled. The defendant should not be able to exploit the claimant's earning opportunity simply because that opportunity is considered too precious to ever be realised. see also Grantham & Rickett, “Disgorgement”, note 18 above, at p. 174 (suggesting that Birks’ approach would subject every case of disgorgement for wrongdoing to alternative analysis as restitution for unjust enrichment).

67 Waddams, S.M., “Profits Derived From Breach of Contract: Damages or Restitution” (1997) 11 J. of Contract Law 115Google Scholar.

68 [1974] 1 W.L.R. 798, 811.

69 “Direct and Indirect Enrichment”, note 16 above, at p. 510.