Restitution

Restitution

[res-ti-too-shuhn, -tyoo-]

The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court orders restitution it orders the defendant to give up his gains to the claimant. When a court orders compensation it orders the defendant to compensate the claimant for his loss.

Restitution, like other legal responses, can be triggered by any one of a variety of causative events. These are events in the real world which trigger a legal response. Broadly speaking, an obligation to make restitution can be triggered by two different types of causative event:

  1. Wrongs
  2. Unjust enrichment

It is arguable that other types of causative event can also trigger an obligation to make restitution, but the above two are by far the most important. They will be considered in turn. It should be pointed out at this stage that the following analysis is based on English law. However, it is largely an analysis of principle rather than case law and therefore should have considerable relevance for most common law systems.

Restitution for wrongs

Imagine that A commits a wrong against B and B sues in respect of that wrong. A will certainly be liable to pay compensation to B. If B seeks compensation then the court award will be measured by reference to the loss that B has suffered as a result of A’s wrongful act. However, in certain circumstances it will be open to B to seek restitution rather than compensation. It will be in his interest to do so if the profit that A made by his wrongful act is greater than the loss suffered by B.

Whether or not a claimant can seek restitution for a wrong depends to a large extent on the particular wrong in question. For example, in English law, restitution for breach of fiduciary duty is widely available but restitution for breach of contract is fairly exceptional. The wrong could be of any one of the following types:

  1. A statutory tort
  2. A common law tort
  3. An equitable wrong
  4. A breach of contract

Notice that (1)-(4) are all causative events (see above). The law responds to each of them by imposing an obligation to pay compensatory damages. Restitution for wrongs is the subject which deals with the issue of when exactly the law also responds by imposing an obligation to make restitution.

Example. In Attorney-General v Blake [2001] 1 AC 268, an English court found itself faced with the following claim. The defendant had made a profit somewhere in the region of £60,000 as a direct result of breaching his contract with the claimant. The claimant was undoubtedly entitled to claim compensatory damages but had suffered little or no identifiable loss. It therefore decided to seek restitution for the wrong of breach of contract. The claimant won the case and the defendant was ordered to pay over his profits to the claimant. However, the court was careful to point out that the normal legal response to a breach of contract is to award compensation. An order to make restitution was said to be available only in exceptional circumstances.

Restitution to reverse unjust enrichment

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