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Materially Identical to Mistaken Payment

  • Tatiana Cutts

Abstract

Mistaken payment is the ‘core case’ of unjust enrichment, and it has had a powerful effect on the development of this area of private law. For Peter Birks, unjust enrichment was simply ‘the law of all events materially identical to mistaken payment’—to be shaped through a process of abstraction from that core case. But this begs the question: how do we work out what counts as ‘materially identical’ to mistaken payment? The most obvious starting point, and that which Birks chose, is the central characteristic of money: money is valuable. Thus, ‘the law of all events materially identical to mistaken payments’ is ‘the law of all events that unjustly enrich one party at another’s expense’.

In this article, I argue that this starting point is incorrect. Rather than looking for some factual similarity between mistaken payment and other events, we should identify the role that money plays in justifying restitution. And what justifies restitution in the core case is not the ‘value’ or ‘benefit’ that money confers; rather, it is a defect in the legal transaction that links payor with payee. The payee is not liable because she has been ‘enriched’, but because she is the counterparty to a legal transaction which exhibits traits that there are institutional reasons to disavow. Just like contract and torts, the role of value is secondary: where correcting the injustice in specie is impossible or undesirable, the defendant must pay whichever sum will most nearly achieve that goal.

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I am grateful for comments from Neil Duxbury, David Kershaw, Emmanuel Voyaikis and Charlie Webb.

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1. As Chambers puts it: “The receipt of money is a specific type of enrichment, and its paradigm” Chambers, Robert, “Two Kinds of Enrichment” in Chambers, Robert, Mitchell, Charles & Penner, James, eds, Philosophical Foundations of the Law of Unjust Enrichment (Oxford University Press, 2009) at 246 [Chambers, “Two Kinds of Enrichment”]. Birks derives the example from Kelly v Solari (1841) 9 M&W 54, 152 ER 24: Birks, Peter, Unjust Enrichment, 2nd ed (Oxford University Press, 2004) at 5 [Birks, Unjust Enrichment]. I prefer the term “transfer” to “payment”; the latter implies an existing payment liability to be discharged.

2. Birks, ibid.

3. Ibid at 51. The same emphasis appears in Birks, Peter, An Introduction to the Law of Restitution (Clarendon Press, 1985) at 9 and in Goff, Robert & Jones, Gareth, The Law of Restitution (Sweet & Maxwell, 1966) at ch 1.

4. Birks, Unjust Enrichment, supra note 1 at 10.

5. Ibid.

6. To these, a fourth is now usually added: there must be no defences available to the claimant. See, e.g., Banque Financiere de la Cite SA v Parc (Battersea) Ltd, [1999] 1 AC 221 at 227 (HL) Lord Steyn [Banque Financiere] and The Investment Trust Companies (in liquidation) v Revenue and Customs Commissioners [2017] UKSC 29 at 24; [2017] 2 WLR 1200, Lord Reed [Investment Trust].

7. Two features have played a prominent role in that debate: (i) whether “mistake” is exemplary of the “absence of basis” for an enrichment, or one of a number of “unjust factors; and (ii) whether “at the expense of” should be conceived of causally, or as a tighter “direct transfer” between claimant and defendant.

8. Goff & Jones, supra note 3 at 14. Birks went so far as to say that it was “barely necessary to say anything about money received”, Birks, Unjust Enrichment, supra note 1 at 53. See also, Chambers, “Two Kinds of Enrichment”, supra note 1, for whom there are two kinds of enrichment (though Chambers does not deal with the core case directly).

9. Birks, Unjust Enrichment, supra note 1 at 53.

10. See, e.g., Cressman v Coys of Kensington [2004] EWCA Civ 47, involving the mistaken transfer of a number plate.

11. The leading case is now Benedetti v Sawiris [2013] UKSC 50.

12. For a different (property-focused) line of attack, see Peter G Watts, “‘Unjust Enrichment’—the Potion that Induces Well-meaning Sloppiness of Thought” (2016) 69:1 Curr Legal Probs 289 [Watts, “‘Unjust Enrichment’—the Potion”].

13. Or rather, does not bear on the positive reasons for restitution.

14. The focus in this article is on limbs (i) and (ii) of Birks’ test: what counts as a relevant defect for the purposes of (iii) (which has been the subject of many other academic efforts) falls outside the parameters of this article.

15. Birks, Unjust Enrichment, supra note 1 at 9.

16. Ibid at 8.

17. Derived from Kelly v Solari (1841) 9 M&W 54, 152 ER 24, which Birks discusses ibid at 5.

18. Birks, Unjust Enrichment, supra note 1 at 10.

19. Ibid.

20. Ibid [emphasis added].

21. Birks, Unjust Enrichment, supra note 1 at 10.

22. See, e.g., Webb, Charlie, Reason and Restitution: A Theory of Unjust Enrichment (Oxford University Press, 2016) at 102.

23. Ibid at 46; Robert Stevens, “The Unjust Enrichment Disaster” (2018) 134 Law Q Rev 574 at 576 [Stevens, “Unjust Enrichment Disaster”].

24. Birks, Unjust Enrichment, supra note 1 at 16.

25. Summers draws this distinction in his paper, Andrew Summers, “In Defence of Description: Private Law for Positivists” (Paper presented at the London School of Economics, 25 April 2017) [unpublished].

26. Frederick Wilmot-Smith, “Reasons? For Restitution?” (2016) 79:6 Mod L Rev 1116 at 1120 [emphasis added] [Wilmot-Smith, “Reasons?”].

27. Or, how different to justify separating them.

28. Banque Financiere, supra note 6 at 227 and Investment Trust, supra note 6.

29. Birks, Unjust Enrichment, supra note 1 at 53.

30. Ibid.

31. Birks, Unjust Enrichment, supra note 1 at 49. See also, Ernest J Weinrib, Corrective Justice (Oxford University Press, 2012) at 192 [Weinrib, Corrective Justice]. The search for a “transfer of value” now underpins the judicial approach to identifying the requisite connection between the parties: see, e.g., Investment Trust, supra note 6 at 43.

32. See, e.g., Investment Trust, ibid; Menelaou v Bank of Cyprus [2015] UKSC 66 at para 30, [2016] AC 176, Floyd LJ; Mitchell, Charles, Mitchell, Paul & Watterson, Stephen, eds, Goff & Jones: The Law of Unjust Enrichment, 8th ed (Sweet & Maxwell, 2011), s 6-01.

33. See, e.g., Wienrib, Corrective Justice, supra note 31 at 192; Stephen Watterson, “‘Direct Transfers’ in the Law of Unjust Enrichment” (2011) 64:1 Curr Legal Probs 435.

34. See, e.g., Andrew Lodder, Enrichment in the Law of Unjust Enrichment (Hart, 2012) at 17.

35. See, e.g., Lionel Smith, “Restitution: The Heart of Corrective Justice” (2001) 79:7 Tex L Rev 2115 at 2142; James Edelman, “The Meaning of Loss and Enrichment” in Chambers, Mitchell & Penner, supra note 1 at 226; Lodder, supra note 34 at 17.

36. See, e.g., Weinrib, Corrective Justice, supra note 31 at 192; Lodder, ibid at 17.

37. Weinrib, Corrective Justice, ibid.

38. Ibid.

39. Ibid at 194.

40. Called “exchange potential” elsewhere: Tatiana Cutts, “Tracing, Value and Transactions” (2016) 79:3 Mod L Rev 381 at 395-96.

41. And from the use to which a particular person might put the asset.

42. Or from a particular asset or liability.

43. See also James Penner, “Value, Property, and Unjust Enrichment: Trusts of Traceable Proceeds” in Chambers, Mitchell & Penner, supra note 1 at 311.

44. Compare Penner, ibid at 306.

45. See, e.g., Andrew Burrows, The Law of Restitution, 3rd ed (Oxford University Press, 2011) at 47 [Burrows, The Law of Restitution]; Mitchell McInnes, “Enrichments and Reasons for Restitution: Protecting Freedom of Choice” (2003) 48:3 McGill LJ 419 at 428 [McInnes, “Enrichments”]; Beatson, Jack, The Use and Abuse of Unjust Enrichment: Essays on the Law of Restitution (Clarendon Press, 1994) at 21-44.

46. Given that she could have acquired the service gratuitously.

47. See, e.g., Burrows, The Law of Restitution, supra note 45 at 47; Benedetti, supra note 11 at 190.

48. For the latter, see Frederick Wilmot-Smith, “Reconsidering Total Failure” (2013) 72:2 Cambridge LJ 414.

49. Lodder, supra note 34 at 87. See also McInnes, “Enrichments”, supra note 45 at 428.

50. See text to supra note 43.

51. A version of this example has long been used in academic discourse. See, e.g., Stevens, “Unjust Enrichment Disaster”, supra note 23 at 578; Burrows, Andrew, “Interest” in Virgo, Graham & Worthington, Sarah, eds, Commercial Remedies: Resolving Controversies (Cambridge University Press, 2017) at 267; Smith, Lionel, “Restitution: A New Start” in Devonshire, Peter & Havelock, Rohan, eds, The Impact of Equity and Restitution in Commerce (Hart, 2018).

52. See now Investment Trust, supra note 6.

53. Klimchuk, Dennis, “Unjust Enrichment and Corrective Justice” in Neyers, Jason, McInnes, Mitchell & Pitel, Stephen, eds, Understanding Unjust Enrichment (Hart, 2004) at 119. See further, Investment Trust, supra note 6 at 120; John Gardner, “What is Tort Law For? Part 1: The Place of Corrective Justice” (2011) 30:1 Law & Phil 1 at 22; Zoë Sinel, “Through Thick and Thin: The Place of Corrective Justice in Unjust Enrichment” (2011) 31:3 Oxford J Legal Stud 551; Weinrib, Corrective Justice, supra note 31 at 187-88.

54. Klimchuk, “Unjust Enrichment and Corrective Justice”, ibid at 120; Gardner, ibid at 22; Sinel, ibid; Weinrib, Corrective Justice, ibid; Stevens, “Unjust Enrichment Disaster”, supra note 23 at 577; L Smith, “Restitution: A New Start”, supra note 51; James Penner, “We all make Mistakes: A ‘Duty of Virtue’ Theory of Restitutionary Liability for Mistaken Payments” (2018) 81:2 Mod L Rev 222 at 224.

55. Birks, Unjust Enrichment, supra note 1 at 207.

56. Ibid.

57. Ibid at 208—“the peculiar normativity of extant gain”.

58. Chambers argues that “the recipient of a mistaken payment is the only person in the world who can save the payer from loss without bearing the cost of doing so”: Robert Chambers, “Proprietary Restitution and Change of Position” in Andrew Dyson, James Goudkamp & Frederick Wilmot-Smith, eds, Defences in Unjust Enrichment (Hart, 2016) at 119. See also, J Beatson & W Bishop, “Mistaken Payments in the Law of Restitution” (1986) 36:2 UTLJ 149 at 150; Mitchell McInnes, “Enrichment Revisited” in Neyers, McInnes & Pitel, supra note 53 at 169; Chambers, “Two Kinds of Enrichment”, supra note 1 at 267; Stephen A Smith, “A Duty to Make Restitution” (2013) 26:1 Can JL & Jur 157 at 172 [SA Smith, “Restitution”].

59. Frederick Wilmot-Smith, “Should the Payee Pay?” (2017) 37:4 Oxford J Legal Stud 844 at 849 [Wilmot-Smith, “Should the Payee Pay?”].

60. Ibid at 848-49.

61. For McBride, this is the extent of the normative role of value: see also, McBride, Nicholas, The Humanity of Private Law: Part I: Explanation (Hart, 2018) at 197 [McBride, Humanity of Private Law].

62. See also Frederick Wilmot-Smith, “Taxing Questions” (2015) 131:4 Law Q Rev 531 at 534.

63. As Watts puts it, “mere preservation of our wealth against erosion by others has not been a protected interest”: Watts, “‘Unjust Enrichment’—the Potion”, supra note 12.

64. For so long as she does not stray across the boundary to tortious conduct.

65. See, e.g., OBG Ltd v Allan [2007] UKHL 21 at 142, [2008] 1 AC 1 (HL) Lord Nicholls.

66. See also Peter Watts, “Unjust Enrichment” (2005) 121 Law Q Rev 163 at 166.

67. See ibid at 53. See, e.g., Burrows, The Law of Restitution, supra note 45 at 48; Mitchell, Charles, Mitchell, Paul & Watterson, Stephen, eds, Goff & Jones: The Law of Unjust Enrichment, 9th ed (Sweet & Maxwell, 2016), s 4-28.

68. See, e.g., Peel (Regional Municipality) v Canada, 1992 SCC 3 at 796, [1992] 3 SCR 762, McLachlin J; BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783 at 799, Goff J.

69. Fox, David, Property Rights in Money (Oxford University Press, 2008) at 9, s 1.29.

70. Ibid. On the nature of presumptions, see William Swadling, “Explaining Resulting Trusts” (2008) 124 Law Q Rev 72.

71. Benefit predominates in the post-2003 literature (see, e.g., Mitchell, Mitchell & Watterson, supra note 67 at pt 4 (“Enrichment”); Burrows, The Law of Restitution, supra note 45 at ch 3 (“Benefit”)) and is the preferred approach to enrichment in cases that concern services (see, e.g., Benedetti, supra note 11).

72. Burrows, The Law of Restitution, supra note 45 at 47. This, it is argued, provides a way of accommodating “pure services” within the law of unjust enrichment.

73. Edelman, supra note 35 at 226 [emphasis added].

74. Ibid at 228 [emphasis added]. See also, Mitchell, Mitchell & Watterson, supra note 67.

75. See also Zelizer, Viviana A, The Social Meaning of Money (Princeton University Press, 1994) at 3-5, demonstrating that: “Not all dollars are equal”. See also, Dodd, Nigel, The Social Life of Money (Princeton University Press, 2014) at 286.

76. Burrows, The Law of Restitution, supra note 45 at 45 [emphasis added]. See also, Birks, Unjust Enrichment, supra note 1 at 59.

77. Burrows, ibid at 48.

78. Webb, supra note 22 at 109.

79. This has long been a concern in treating Jehovah’s Witnesses who require blood transfusion, particularly where the treatment required is for a child. See, e.g., An NHS Trust v Child B [2014] EWHC 3486.

80. Burrows, The Law of Restitution, supra note 45 at 46.

81. Mitchell, Mitchell & Watterson, supra note 67 at 14.

82. See Ronald Dworkin, “Is Wealth a Value” (1980) 9:2 J Legal Stud 191 at 201.

83. Which is to say, according to the balance of reasons that apply to her.

84. Note that some commentators prefer to treat “incontrovertible benefit” as a presumption: Edelman, James & Bant, Elise, Unjust Enrichment, 2nd revised ed (Hart, 2016) ch 4.III.B.

85. Fox, supra note 69 at 9, s 1.29.

86. See, e.g., Edelman, supra note 35 at 228.

87. Assuming the presence of an unjust factor.

88. See Ruabon Steamship Co Ltd v London Assurance (The Ruabon) AC 6 (HL) and Edinburgh Tramways Co Ltd v Courtenay 1909 SC 99.

89. For one argument about what that relationship is, see Edelman, supra note 35 at 239.

90. See also, Edelman, ibid at 120; Gardner, supra note 53 at 22; Sinel, supra note 53; Weinrib, Corrective Justice, supra note 31 at 187-88.

91. Webb, supra note 22 at 102.

92. See, e.g., Samuel Stoljar, “Unjust Enrichment and Unjust Sacrifice” (1987) 50:5 Mod L Rev 603; Peter Jaffey, “Two Theories of Unjust Enrichment” in Neyers, McInnes & Pitel, supra note 53; Andrew Botterell, “Property, Corrective Justice, and the Nature of the Cause of Action in Unjust Enrichment” (2007) 20:2 Can JL & Jur 275; McFarlane, Ben, “Unjust Enrichment, Rights and Value” in Nolan, Donal & Robertson, Andrew, eds, Rights and Private Law (Hart, 2012); Dan Priel, “The Justice in Unjust Enrichment” (2014) 51:3 Osgoode Hall LJ 813, 837-42; Watts, supra note 63 at 289; Webb, supra note 22.

93. Stoljar, ibid at 603.

94. Webb, supra note 22 at 74.

95. Ibid at 90.

96. Ibid at 122.

97. Priel draws something like this distinction in his between fairness and equity: Priel, supra note 92 at 844-52.

98. Webb, supra note 22 at 93.

99. How to justify the restitutionary liability of a non-culpable recipient.

100. Wilmot-Smith, “Reasons?”, supra note 26 at 1131-32.

101. Botterell, supra note 92 at 292.

102. Which are considered in Wilmot-Smith, “Should the Payee Pay?”, supra note 59 at 849-51.

103. See also Wilmot-Smith, “Reasons?”, supra note 26.

104. Stoljar, supra note 92.

105. Webb, supra note 22 at 99.

106. Ibid.

107. Ibid at 105.

108. Ibid at 310.

109. Text to supra note 63.

110. Joseph Raz, The Authority of Law: Essays on Law and Morality (Clarendon Press, 1979) at 170 [Raz, Authority of Law].

111. Ibid at 169. See further on unjust enrichment and self-determination Jennifer Nadler, “What Right Does Unjust Enrichment Law Protect?” (2008) 28:2 Oxford J Legal Stud 245 at 264.

112. Raz, Authority of Law, supra note 110 at 170.

113. In this sense, the ability to reverse defective transactions may be one part of the law’s armoury to “protect the practice of undertaking voluntary obligations”: Joseph Raz, “Promises in Morality and Law” (1982) 95 Harv L Rev 916 at 936 [Raz, “Morality and Law”]. But it may also protect other practices, some of which Nicholas McBride lists in “Restitution and Unjust Enrichment: The Coming Counter-Revolution” (Paper delivered at the Obligations VIII Conference at the Cambridge Private Law Centre, July 2016) [unpublished].

114. SA Smith, “Restitution”, supra note 58; McBride also puts it thus in his [unpublished] “Restitution and Unjust Enrichment: The Coming Counter-Revolution”, ibid. Compare Penner, supra note 54 at 240.

115. On the role of the law of contract in preventing such institutional harm, see further Raz, “Morality and Law”, supra note 113.

116. Thus, she is awarded the power to affirm, avoid or demand that the transaction be treated as wholly void.

117. McBride, Humanity of Private Law, supra note 61 at 193: “Only one thing could redeem [a gift made under duress or undue influence] which is A’s affirming the gift when A frees herself from B’s domination”.

118. Ibid.

119. Ibid at 192-93.

120. Ibid at 193.

121. Banks are not strictly subject to any payment obligation until the customer’s instruction is made, so that the term ‘right’ must be understood broadly here.

122. For a detailed rationalisation of the rules concerning rescission of gifts (and the claim that causative mistakes ground rescission) see Birke Häcker, “Mistaken Gifts After Pitt v Holt” (2014) 67:1 Curr Legal Probs 333.

123. Raz, “Morality and Law”, supra note 113 at 936.

124. Nicholas McBride has called this the “channeling” function: McBride, Humanity of Private Law, supra note 61 at 189.

125. Ernest J Weinrib, “The Structure of Unjustness” 92 Boston U L Rev 1067 at 1073.

126. Stevens, “Unjust Enrichment Disaster”, supra note 23 at 580-82. See also L Smith, “Restitution: A New Start” in Peter Devonshire & Rohan Havelock, supra note 51.

127. Stevens, “Unjust Enrichment Disaster”, ibid.

128. Ibid at 582. Weinrib, too, argues that “acceptance” extends beyond an actual agreement to pay, and can be “imputed”: Ernest J Weinrib, “Correctively Unjust Enrichment” in Chambers, Mitchell & Penner, supra note 1 at 43.

129. See further Wilmot-Smith, “Should the Payee Pay?”, supra note 59 at 857-61. Klimchuk argues that in such cases “the defendant’s acceptance is so constructive that it no longer serves to explain her liability”: Dennis Klimchuk, “The Normative Foundations of Unjust Enrichment” in Chambers, Mitchell & Penner, supra note 1 at 90.

130. Or the bank, on her behalf.

131. Stevens, Robert, Torts and Rights (Oxford University Press, 2007) at 59.

132. Ibid at 60.

I am grateful for comments from Neil Duxbury, David Kershaw, Emmanuel Voyaikis and Charlie Webb.

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