Awards Measured by Benefit: Restitution

• Author: Jamie Cassels/Elizabeth Adjin-Tettey
• Profession: Professor of Law, Vice President Academic, and Provost, University of Victoria/Professor of Law, University of Victoria
• Pages: 249-280

CHAPTER 7

AWARDS MEASURED BY

BENEFIT: RESTITUTION

A. INTRODUCTION

The word “restitution” refers both to a particular type of remedy and also

to a body of substantive law regarding civil liability. As a type of remedy,

restitution is available in specif‌ic common law and equitable causes of

action to strip unjust gains from a wrongdoer. The basis of restitution is

corrective justice because it seeks to restore a disturbed equilibrium be-

twee n the par ties bro ught about b y the unju st enric hment of t he defend-

ant at the plaintiff’s expense.1 As a body of substantive law, restitution

has e merged as a new basis of li ability or cau se of action , independe nt of

contract and tort, aimed at preventing unjust enrichment.

Both types of restitution are grounded in the principle of unjust

enrichment. As a body of substantive law, the obligations encompassed

in the law of restitution are organized around the moral notion that the

law should prevent wrongful or unjust gains made at the expense of

others. And while restitutionary remedies can be said to “compensate”

1 See Peel (Regional Municipalit y) v. Canada, [1992] 3 S.C.R. 762 at 804, McLach lin

J. [Peel]; Kingstreet Investments Ltd . v. New Bruns wick (Department of Finance),

2007 SCC 1 at para. 32; James Gord ley, Foundatio ns of Private Law: Property,

Torts, Unjust Enrichment (Oxford, New York: Oxford Uni versity Press, 2006) at

445–4 6; E.J. Weinrib (2000) “Re stitutionary Damage s As Corrective Justice”

Theoretical Inqui ries in Law: Vol. 1: No. 1, Article 1, online: ww w.bepress.com /

til/default/vol1/iss1/art1.

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REMEDIES: THE LAW OF DAMAGES250

the plaintiff for wrongdoing, they are measured by the wrongful benef‌it

to the defendant regardless of the plaintiff’s loss, if any.

Restitutionary remedies are, therefore, not strictly compensatory.

While they do usually provide compensation for losses suffered by the

plaintiff, they are measured not by what the plaintiff has lostbut by

what the defendant has gained. In the result, awards based on resti-

tution may be more or less than the pecuniary harm suffered by the

plaintiff. They are, of course, attractive to a plaintiff when it is diff‌icult

to establish a loss, but the defendant has made a wrongful prof‌it.

The law of restitution has been developing rapidly over the past four

decades. Restitutionary remedies have long been available for a number

of specif‌ied common law and equitable wrongs. For example, in actions

of “quasi contract” courts would imply agreements between the parties

in order to justify an order for the return of money mistakenly paid by

one to the other, or payment for services rendered at the defendant’s re-

quest. On the equitable side, courts employed restitutionary remedies

for breach of trust and rescission. Many of these historical categories of

liability are illustrated later in this chapter.

More recently these disparate remedies have been aggregating

under the general heading of unjust enrichment. The concept of unjust

enrichment, in turn, has evolved from a mere description of these rem-

edies to an independent body of substantive law (including principles

of liability) and an autonomous basis of civil liability. In particular,

the f‌iction that restitution turned on there being an implied contract

between the parties has been abandoned. As the House of Lords stat-

ed, “The alleged contract by the blackmailer and the robber was never

made and never could be. The law, in order to do justice, imputed to

the wrongdoer a promise which alone as forms of action then existed

could give the injured person a reasonable remedy.”2 These “fantastic

resemblances of contracts invented in order to meet the requirement

of the law as to forms of action”3 are no longer necessary. Freed from

the forms of action, courts now recognize that restitutionar y remedies

are imposed by law, not by the parties, and are grounded in unjust

enrichment, not consent. Somewhat arbitrarily, this more recent trend

in Canada may be traced to the 1954 case of Deglmanv. Guaranty Trust

Co.4 in which the Supreme Court of Canada ordered a restitutionary

remedy to a plaintiff who had conferred benef‌its on his aunt under an

unenforceable contract. The Court acknowledged that the obligation to

2 United Australia Ltd. v. Barclay’s Bank, Ltd., [1941] A.C. 1 at 28 (H.L.).

3 Ibid. at 29.

4 Deglman v. Guaranty Trust Co. of Canada, [1954] S.C.R. 725 [Deglman].

Awards Measure d by Benef‌it: Restitution251

pay was “based not on contract, but on an obligation imposed by law”5

in order to prevent unjust enrichment.

B. THE PRINCIPLE OF UNJUST ENRICHMENT

The writers of texts have long urged that the specif‌ic remedies noted

above are better understood as part of an autonomous body of law

known as restitution. This body of law is organized around the princi-

ple of unjust enrichment. This is the position in the United States, and

Canadian courts have moved substantially in this direction. Prominent

statements of the principle of unjust enrichment include the early and

famous dictum of Lord Mansf‌ield in Moses v. Macferlan6—“the gist of

this kind of action is that the defendant, upon the circumstances of

the case, is obliged by the ties of natural justice and equity to refund

the money.” More contemporary are those found in the American Law

Institute’s Restatement (Third) of the Law of Restitution and Unjust En-

richment:7 “A person who is unjustly enriched at the expense of another

is liable in restitution to the other”; Lord Wright’s speech in Fibrosa,8

that “any civilized system of law is bound to provide remedies for cases

of what has been called unjust enrichment or unjust benef‌it, that is to

prevent a man from retaining the money of or some benef‌it derived

from another which it is against conscience that he should keep.”

In Canada the development of the law of unjust enrichment has

been achieved primarily through the evolution of the constructive

trust. In a series of cases involving the property rights of cohabiting

couples (beginning with Rathwell v. Rathwell9 and Pettkus v. Becker10),

the Supreme Court of Canada substantially consolidated the principles

of unjust enrichment.11 In these cases the Court aff‌irmed that, when

one cohabitee contributes in money or services towards the acquisi-

tion of property by the other, the principle of unjust enrichment may

5 Ibid. at 734.

6 (1760), 2 Burr. 1005 at 1012, 97 E.R. 676 (K.B.).

7 American L aw Institute, Restatem ent (Third) of Restitution and Unjust Enrich-

ment (Tentative Drafts) (Philadelphi a, PA: America n Law Institute, 2000 –2006)

at § 1 [Restatement (Third)].

8 Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barb our Ltd., [1943] A.C. 32 at

61 (H.L.).

9 [1978] 2 S.C.R. 436 [Rathwell].

10[1980] 2 S.C.R. 834 [Pettkus].

11See al so Sorochan v. Sorochan, [1986] 2 S.C.R. 38 [Sorochan]; Peter v. Beblow,

[1993] 1 S.C.R. 980 [Peter].