Restitution and Disgorgement

AuthorJohn D. McCamus
The law of contracts and torts adopted its modern shape in the nine-
teenth century as t he law was gradually tr ansformed from its origins
in medieval common law and equity into a set of modern categories or
subjects of the law recogniz able to the contemporary law yer.1 It was not
until the twentieth century, however, that a similar proces s gathered
together various doctrines of common law and equity and reshaped
them as the modern law of restitution. The invention or recognition of
the subject occurred in the United States in the f‌irst half of the century.
In 1937, the American Law Institute published its ground-breaking
Restateme nt of Restitutio n.2 The subtitle of the volume, Quasi-contracts
and Constructive Trust, signalled to the reader that Restatement of Res-
titution incorporated doctrines of the common law often referred to as
the law of quasi-contract s and certain doctrines of equity related to t he
law of trusts. The organi zing premise or thesis of t he volume was that
these seemingly d isparate material s could be organized and restated
1 See, generally, JH Bake r, An Introduction to English Legal Histor y, 4th ed (London:
Butterworth s LexisNexis, 2002) ch 11, 16, & 17.
2 American L aw Institute, Restateme nt of Restitution: Qua si-contracts and
Constructive Trusts (St Paul: Amer ican Law Institute, 1937) [Restateme nt of
Restitution]. For the early hi story and development of the analy tical framework
underlying t he Restatement, see A Kull, “James Bar r Ames and the Early Modern
History of Unjust En richment” (2005) 25 Oxford J Legal Stud 297.
Restitut ion and Disgorgement 1141
on the basis of a common underlying principle, termed the principle
against unjust enrichment. The underlying principle was stated boldly
in the f‌irst section of Restatement of Restitution in the following ter ms: A
person who has been unjustly enriched at the expense of another is
required to make restitution to the other.3 The work then proceeds to
restate, in the manner of the American restatements, the various rules
and doctrines of common law and equity that the Institute considered
to be unif‌ied by or explained by that principle. Subsequent chapters of
the volume restated the rules relat ing to the recovery of benef‌its con-
ferred in an emergency, by mistake, under coercion, or under ineffec-
tive transactions and of benef‌its acquired through wrongful conduct of
various kinds, includi ng breach of f‌iduciary obligation.
Recovery of money paid under a mistake provide s a simple illus-
tration. Under traditional law, monies paid under mist ake of fact as
where the payer mistakenly believes he is indebted to the payee or mis-
takenly believes that the payee is some other person has been con-
sidered recoverable. Obviously, such recovery is not grounded on either
contract or tort. There is no contract under which the payee is commit-
ted to repay the money nor is the receipt of mistaken pay ment itself
tortious. Though the idea had developed that relief could be explained
on the basis of an implied undert aking to repay, the Institute adopted
the view that the implied contr act was a mere f‌iction and that the pref-
erable, indeed more coherent, explanation for recovery was that, other-
wise, the mistakenly paid party would be unjustly enriched.
In response to the Institute’s initiative, recognition of restitution as
a separate discipline or subject of the law developed rather quick ly in
Am er ic a n l aw.4 Recognition came only more slowly, however, in other
common law jurisdictions. Thus, as recent ly as 1978, an English judge
stated: “[T]here is no general doctrine of unjust enrichment recogni zed
in English law.”5 In recent decades, however, the basic approach adopted
in Restatement of Restitut ion appears to have been accepted in the older
commonwealth jurisdictions and lengthy treatises on the subject have
3 Ibid, s 1.
4 Some evidence of th is is to be found in the subsequent ly published and updated
volumes 2 and 3 of Restate ment of Restitution, above note 2, whic h consist of
brief summ aries of thousands of Ame rican cases referr ing to and applying
sections of the or iginal volume. See also G Pa lmer, The Law of Restitution
(Boston: Little, Brow n, 1978). Although it is true that t he Institute’s attempt
to develop a second rest atement faltered after publish ing a series of tentative
drafts, a t hird restatement has b een published. See America n Law Institute,
Restateme nt of the Law (Third), Restitution and Unju st Enrichment (St Paul:
American L aw Institute, 2011).
5 Orakpo v Manson Investment L td, [1978] AC 95 at 104 (HL), Lord Diplock.
appeared in England,6 Australia,7 New Zealand,8 and Canada.9 Indeed,
in Canada, recognition came more quickly than in the other common-
wealth jurisd ictions. The American approach was essentially adopted
by the Supreme Court of Canada in a rema rkable series of decisions
beginning in 1956 with Deglman v Guaranty Trust Co of Canada.10
In this chapter, we consider various restitutionary claims that may
arise in a transactional or contractual s etting. Of principal concern are
the restitutionar y remedies available upon discharge of an agreement
by breach.11 As we shall see, for the innocent part y, the victim of the
breach of contract, a claim in rest itution for the value of benef‌its con-
ferred on the other party m ay provide an attractive alternative to the
claim for damages for breach of contract. In recent year s, it has been
suggested that a fur ther alternative claim avail able to the innocent party
may be a claim to recover the prof‌its secured by the party in breach a s
a result of the breach of contract. This ty pe of claim, here referred to
as a claim for disgorgement of prof‌its, is well recognized in the context
of other kinds of wrongful conduct and, although the point i s not free
from content ion, the Restatement of Restitution and moder n treatises
on the law of restitution typically include an account of disgorgement
claims as an aspect of the law of restitution. Thus, for example, claims
for the disgorgement of prof‌its may arise where a defendant has prof‌ited
through c rime,12 tort,13 breach of f‌iduciar y obligation,14 and breach of
conf‌idence.15 Until recently, however, it has been assumed that such a
6 C Mitchell, P Mitchell & S Watterson, ed s, Goff & Jones, The Law of Unjust
Enrichmen t, 9th ed (London: Sweet & Max well, 2016); A Burrows, The
Law of Restitut ion, 3d ed (Oxford: Oxford University Pre ss, 2011); G Virgo,
The Principles of the L aw of Restitution, 3d ed (Oxford: Oxford Univer sity
Press, 2015); S Hedley & M Hall iwell, eds, The Law of Restitutio n (London:
Butterworths LexisNexis, 2002).
7 K Mason, JW Ca rter & GJ Tolhurst, Restit ution Law in Australia, 3d ed (Sydney:
LexisNex is, 2016); J Edelman & E Bant, Unjust Enr ichment (Oxford: Hart
Publishing, 2 016).
8 RB Grantham & CES Ric kett, Enrichment and Restitu tion in New Zealand
(Oxford: Hart Publi shing, 2000).
9 PD Maddaugh & JD McCamus, The Law of Re stitution, looseleaf (Toronto:
Thomson Reuters, 200 4–) [Maddaugh & McCamus]; GHL Fridman, Restitut ion,
2d ed (Toronto: Carswell, 1992).
10 [1954] SCR 725 [Deglman]. For a brief account, se e JD McCamus, An
Introduction to the Can adian Law of Restitution an d Unjust Enrichment (Toronto:
Thomson Reuters, 2020) ch 2.
11 See Chapter 15.
12 S ee, for example, Maddaugh & McCamus, above note 9, ch 23.
13 Ibid , ch 24.
14 Ibid, c h 27.
15 Ibid, ch 28.

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