The Canadian Bar Review

THE CANADIAN BAR REVIEW

VOL. XVI APPiL, 1938 No. 4

THE PRINCIPLE OF UNJUST ENRICHMENT IN ENGLISH LAW. A Study in Comparative Law. It would not be surprising if many English lawyers .felt critical about .the very title of this study, regardless of its contents. Is not the approach implicit in it alien1to English- law? English law has been built upon forms of action which were gradually extended and adapted to new needs, but it has not been built upon abstract principles. There is no form of action equivalent to a general action for unjust enrichment, nor-so at least would many English lawyers say-is there any need for one. . Has not English law found equitable solutions in other ways? Nevertheless such a study appears to the present writer to be profitable and even necessary for the following reasons (1) English law, although originally based on .individual forms of action, has fast moved away from them in recent years. As law becomes more complex and precedents more numerous, as the complexity of new social problems demands new remedies, it becomes more and more necessary to find general principles, both, for purposes of clarification and for the guidance of those engaged in the practical application of the law., This tendency has been particularly notable in the law of torts, in which general principles of. liability more and more displace individual actions. It applies equally to other branches of the law. (2) I hope to show-encouraged by some recent judgments of great authority as well as by the -studies of some learned authors-that a number .. of legal problems . are at present -not satisfactorily solved by English law, and tat a more adequate solution would require the elaboration of some general principles of unjust enrichment . It will have to be discussed to what

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extent such a solution would require special legislation or would be possible by judicial developments, as they have occurred in other branches of the law. (3) The problem of unjust enrichment is o£ great significance in comparative jurisprudence. In view of the fact that practically every other system of law, whether German, French, American or Russian, have developed such a principle to great practical importance, it is of great interest to ascertain the reasons, whether of a technical kind or derived from legal policy, which may have been in the way of similar developments in England. (4) The problems are, however, not merely of theoretical interest. The principle of unjust enrichment has repeatedly been alleged to be a principle of international law in the sense of Art. 38, Statute of the Permanent Court of International Justice, and as such it may be of great help in the solution of international disputes if it could be found that the principle is known to English law. The question seems to be of practical importance for international arbitrations, where one party is English and the arbitrators are not bound to apply a particular system of law. So one section of the Anglo-German Mixed Arbitrary Tribunal, has consistently applied the principle of unjust enrichment to cases similar to the Chandler v. Webster type, as being a principle of international law. In a more general way that principle was applied in the Lena Goldfields award .= In both these groups of cases it was held that the principle of unjust enrichment was at least not alien to English law. These reasons, it is submitted, justify an enquiry on general lines. Some further support for such an enquiry is derived from the fact that at least one distinguished lawyer' has tentatively put the question for English law and suggested a further enquiry, while another,4 in a searching analysis of quasi-contractual obligations, has found unjust benefit to be the principle underlying these obligations. Furthermore, at least three recent decisions of the Court of Appeals-which will have to be considered in some more detail further below-have discussed, and two of them are largely based upon, unjust. enrichment. The judgment of Lord Wright in the Brook's Wharf Case actually 1 See Recueil VI, 13, 639 and VII, 398. z See The Times, September 3rd, 1930. 3 Professor H. C. Gutteridge, 5 Camb . L.J., pp. 223 f. PROFESSOR WINFIELD, PROVINCE OF THE LAW OF TORT . c Craven-Ellis v. Canons, (19361 2 K.B. 403; Brook's Wharf and Bull Wharf v. Goodman Bros., [1937] 1 K.B. 534 and Morgan v. Ashcroft, [1937] 3 All E.R. 104.

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applies the formula of unjust enrichment as known in continental law. Scott L.J. in Morgan v. - Ashcroft, urges . the importance of trying to find some common- positive principle underlying implied contracts and says that the ,principle of unjust enrichment will be of some importance in that respect. Such an enquiry presents, however, great difficulties. It is not only that English law has certainly not grown according to general principles, but there is the further difficulty that, owing to the, particular development of English law, such traces as there are of unjust enrichment are spread, over many different branches of English law. The problem can only be satisfactorily met by a comparative approach and there is no other problem of civil liability which touches so deeply the foundations of a legal system as the principle of unjust enrichment. Nothing can: give a deeper insight into the -structure -of- a system of law than the question to what extent it admits claims for recovery of money or other property, by which one,party is unjustly. enriched at the expense of another. .In no branch of the law does the difference between the- ways in which various systems of law deal with transfer of property, in which they distinguish between jura in persônam and jura-_ in rem, become clearer than,in the question, of unjust enrichment. The existence of trust, for,example, in English law and-in particular of trusts implied by law, is bound to give to the problem a widely different aspect in English law from that which it has in continental law. - But that- is not all. The attitude towards unjust enrichment is decisively influenced by legal policy. In flew fields ,does an understanding of the general foundations of law help more to an understanding of positive - law than in this. That-this -problem is riot identical with analytical differences is shown by the widely different. development which the principle of unjust enrichment has had in English and American law. The principle. of unjust, enrichment has had particular attraction for legal philosophers, who saw in it an application of the relation between justice, and corrective equity, classically Thestated by Aristotle.6 - principle was elevated to even more fundamental importance-by the French school of social solidarity of which Léon Bourgeois is à chief representative . To this school the principle of unjust enrichment was an instrument which would solve the problem of social justice. By this principle the duties which an individual owed to the community, .6 Cf. KOHLER, LEHRBUCH .DER RECHTSPHILOSOPHIE,p. 29 ; STAMMLER, _ LEHRBUCH DER RECHTSPHILOSOPHIEy, p, . 164. _

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were to be measured.' The principle of unjust enrichment, then, lends itself more than most others to general philosophical observations. This may account, to some extent, for the mistrust which English lawyers have felt against it. The chief factors which have determined the attitude of English law towards the problem of unjust enrichment in the past seem to be three.' (1) The jurisprudential outlook of English lawyers between the 18th and 20th centuries; (2) The tendency of both common lawyers and equity lawyers to preserve the special methods and principles of these two parts of English law; (3) The application of principles of contract to quasi contractual obligations. 1.Jurisprudential Aspect.-"The swing of the pendulum" in the approach to a principle of unjust enrichment as an application of justice and equity can be measured by contrasting the words of Lord Mansfield in Moses v. Macferlan9 and those of Lord Sumner in Baylis v. Bishop of London." Lord Mansfield said : "In one word, 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." Lord Sumner said : "Whatever may have been the case 146 years ago, we are not now free in the twentieth century to administer that vague jurisprudence, which is sometimes attractively styled `justice as between man and man'." This latter attitude comes out strongly in the celebrated decision in the House of Lords in Sinclair v. Broaghani,, 1 1 and in the words of Scrutton L.J. about "well-meaning sloppiness of thought" in Holt v. Markham 12 and again in the majority judgments of the House of Lords in Jones v. Waring and Gillow.11 Recent developments in English law seem to indicate a certain swing of the pendulum back to Lord Mansfield's line of thought, but substituting for the metaphysical style of the

7 The Jurisprudential value of this theory cannot be discussed here . It offers an interesting example of a certain trend of legal thought pros- pering at the beginning of the 20th century, which desired to give a general theoretical expression to a particular ideal of social reform . 8 Cf. as far as quasi-contracts are concerned, WINFIELD, PROVINCE OF THE LAW OF TORT, p. 129 - 141, and Hazeltine's introduction to JACKSON, HISTORY OF QUASI-CONTRACTS. 9 (1760), 2 Burr . 1005. 10 [19131 1 Ch. 127. 11 [19141 A.C. 398. 12 [19231 1 K.B. 513. 13 [19261 A.C. 670.

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eighteenth century the matter of fact terminology of the twentieth century. 14 , 2.=--The Dualism- between Common Law and Equity, and Unjust Enrichment.-In American law, following the lead of Lord Mansfield, which was taken up by Professor Keener and other jurists, quasi-contractual actions are conceived as equitable remedies to which equitable maxims apply." All the more striking is the development of English law where the sharp dualism of Common Law and Equity-upheld to the present day-has prevented a similar development. So strong is the dualism in English law, that, as far as I can ascertain, English lawyers have never noticed that equity deals with unjust enrichment_ by means of resulting and con structive trusts, in a way largely analogous to quasi-contracts. American law, on the other hand, treats constructive trusts and quasi-contracts more and more as parts of one type- of liability." The American Restatement on Restitution deals with quasi- contract, as well as with constructive trusts and kindred matters. It is a completely different matter that one and the 'same court, as it is bound to do after the Judicature Acts, applies . common law and equity to the same case." Rather does the way in which this is clone emphasize the difference in outlook and method between common law and equity in English law. 3.-Application of Principles of Contract to Quasi Contract.-_ Although the application . of principles of unjust enrichment in English law is not co-extensive with quasi-contract, the latter. contains the most important section, and what ideas, there are- on unjust enrichment, have largely been developed in connection with quasi-contract . The particular principles of interpretation applied to quasi-contract are therefore of great importance. The basic fact, of course,' is that personal actions are considered as being either in tort or in contract. Whatever may have been the historical origin of this development, it certainly became firmly established in the course of time. The' use of indebitatus assumpsit has had the greatest share .in the development of quasi-contract, and above all the fact that a contractual remedy was- used to give a quasi-contractual action. This . 14 Cf. the interesting observations of Scott L.J. in Morgan v. Ashcroft, -. [193713 All E.R. .144 and the notes by Winfield and myself in (1937), 53 L.Q.R, p.- 449-458. 1s Cf, infra. is Cf. Ames, SELECTED ESSAYS' ON ANGLO-AM9RIOAN LEGAL HISTORY III, 293. 17 Cf. Sinclair v. Brougham, supra, and the decision of the Court of Appeal in Banque Belge v. Hambrouek, [1921] 1 K.B. 321.

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influence, which need not be discussed in detail" has manifested itself in three directions: (a) There must be "Privity of Contract"-" What privity means, is completely nebulous, as both Winfield and Jackson have shown. If privity meant an actual contractual relation between the parties, as it was held to do in Malcolm v. Scott," the distinction between contractual and quasi-contractual liability would completely disappear. Other cases relate to triangular relations and say nothing but that an action for money had and received can only be maintained where the defendant is in a relation of agency to the plaintiff.21 For details it is sufficient to refer to the investigations of the two learned authors above quoted. The notion of privity of contract has certainly led to great confusion in the law of quasi-contract.22 But in practice the only branch which has suffered from this particular confusion between real contract and fictitious contract concerns claims where money has been received by the def)endant from a third person for transmission to the plaintiff. And here the authorities are so confusing, that it may be hoped that they will not be in the way of a more rational interpretation of quasi- contract in general. (b) Of far greater consequence is the close association of contract and quasi-contract through the fiction of contractual promise. No action lies in quasi-contract on the ground of unjust enrichment, when the fiction of a promise cannot be implied between the parties. To illustrate this proposition, it is sufficient to discuss a few representative decisions. In Sinclair v. Brouhgam" the plaintiffs, who had deposited money in a bank carried on ultra wires by a building society, were not held entitled to recover their money by a claim for money had and received. Lord Haldane said :24 "The remedy of assumpsit must be taken to apply only where the law could consistently impute to the defendant, at least the fiction of a "Thepromise." Lord Sumner said:25 law cannot de jure impute 1s Cf. JACKSON, Op . Cit., chap . 1, p. 39 ff.; WINFIELD, Op . Cit., chap. 1, p. 142. 19 Cf. HALSBuRy, LAws OF ENGLAND, 2nd ed ., vol. 7, p. 275. 20 (1850), 5 Ex. 601 . 21 WINFIELD, op . Cit ., p. 138. 22 Cf. Scott L.J. in Morgan v. Ashcroft, [1937] 3 All E.R. p. 104 . 23 (19141 A.C. 398. 24 P. 417. 25 P. 452.

1938] The Principle of Unjust-Enrichment _- 249

promises to repay, -whether for money bad and received or otherwise, which, if made de facto, it would inexorably avoid." How the House of Lords, by applying the equitable doctrine of Re Hallett's Estate,," arrived in the end at. an -equitable solution, is'not to'be discussed, in this connection.26 It is the rigidity of the- .limitation of quasi-contractual claims to cases where, the fiction of contract is possible, which has proved a landmark in the development of this branch of the law. The authority- of Sinclair v. Brougham and the above quoted dicta of Lord Haldane and Lord Sumner have been used in many cases where the special ultra vires problem did not arise. - The principles established in this case . have mainly been ,applied to cases where a contract between the parties existed-but was not binding in law. In this sense Sinclair v. Brougham was promptly followed by Lord - Sumner in Leslie . v. -Sheill, 27 where an infant, by fraudulently representing that he was of full age, induced the plaintiffs to lend him money. Well known principles prevented the plaintiffs , from ,recovering. damages, but they did not succeed on a count for money had and-received ëither. -_Lord Sumner said that courts were forbidden to allow, under the name of an implied, contract or in the form of an action quasi ex contractu, a proceeding to enforce part of a contract, which the statute declared wholly void. A case in which the -observations on the nature of quasi- contract rather than the actual judicial authority of Sinclair v. Brougham were applied is In re Simms:28 A builder had assigned his business and assets to a company, which then -issued debentures . . Afterwards a receiver appointed by the debenture holders accepted a number of building contracts. The builder was declared bankrupt and the assignment void, so that the property purported . to be assigned became part of the bankrupt's estate. The trustees in bankruptcy having once elected by a declaration to sue the receiver for conversion of property, could not afterwards sue him for the- benefit obtained by tlie, completion of the building contracts. The decision of the Court of Appeal was probably right; since waiver of tort is no longer possible once damages have been asked. But the reasoning of Lord Hanworth M.R. . shows the unfortunate consequence of the fiction concept - carried too far. Lord Hanworth said that, the trustee in bankruptey having., once elected to treat the 25A (1880), 13 Ch. D. 696.- 26 Cf. infra. 27 [19141 3 K.B. -607. [19341 Ch. 1.

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receiver as a trespasser, it was now impossible to conceive even the fiction of a promise to repay the benefit. Here the technical device of the fiction of a contract is treated as a reality.2s It is no exaggeration to say that American law became free to develop a coherent law of unjust enrichment, when it had become clear, in the wor#s of Keener, that The use of the fiction should cease with the necessity which gave rise to it, and, when used, it should be recognized as a fiction and treated as a fact only far the purpose for which it was invented 30 In English law too, the necessity to clarify the law of quasi-contract, by emphasizing the limitation of the fiction of assumpsit, introduced for technical purposes has recently been Particularlymore clearly recognized.,, important is a recent judgment of the Court of Appeal, which, in my submission, implies, to a large extent, the abandonment of the traditional attitude towards quasi-contractual obligations, and the question of unjust enrichment in general, and which challenges principles that, since Sinclair v. Brougham., had come to be considered as sacred.,- In Craven-Elks v. Canons the plaintiff, supposed to be a company director, had made a contract with his co-directors who professed to act on behalf of the defendant company, but in fact, who were, unqualified to act as directors and therefore unauthorized to bind the ocmpany. The plaintiff had rendered services under the supposed contract and now sued on a count for quantum meruit as remuneration for services given under the contract to the company. He was successful, although the contract was void, and the plaintiff could not, therefore, claim under the contract for the agreed remuneration. The underlying idea in the judgments of Greer and Greene LJJ. was undoubtedly that of unjust enrichment. The defendant company had accepted the value of the services of the plaintiff and should not be allowed to profit by a technicality to have 29 The unjust result to which this may lead is shown by the slightly different facts of the American case Terry v. Munger (18901, 121 N.Y. 161. The plaintiff, in a previous action, sued one of two joint tortfeasors, who had converted his property, for the benefit received by waiving the tort and adopting the fiction of lawful sale of the proceeds . In the present action he sued the other party in tort . The court non-suited the plaintiff reasoning that : "The plaintiffs having by their former action, in effect sold this very property, it must follow that . . . . . no cause of action for conversion is in existence against the defendants herein". PROFESSOR KEENER, QUASI CONTRACTS, p. 211, has sharply criticized this judgment for th6 erroneous use of the fiction, and later American decisions have avoided this mistake. 30 KEENER, QUASI CONTRACTS, p. 211. 31 Cf. WINFIELD, 10C. Cit., p. 140; JACKSON, 10C. Cit., P. 123. 32Cf Modern Law Review, p. 76, and 53 L.Q.R. 449 . 33 (19361 2 K.B . 403.

1938], The Principle of Unjust Enrichment 251 - i them for nothing. The decision did not, of course, challenge the actual judicial authority of Sinclair v. Brougham. But ' it does constitute a significant challenge to the legal principles derived from the dicta -in that decision, as applied in cases like Leslie v. Sheill, and re Simms, since it awarded a remuneration on the identical facts which were the basis of a void contract. It also widens the quasi-contractual function of quantum meruit. While Craven-Ellis v. Canons means a departure_ from the fetters imposed upon quasi-contract by an exaggerated fiction theory, the traditional aversion against founding quasi-contract on principles of justice and equity, has been attacked from` another side. Professor Winfield had pointed out34 that the emphatic rejection of aequum et bonum as the basis of quasi- contract was hardly justified, since in the less objectionable form of " reasonable " judges had often applied_ it. As we -hâve seen, that is even true of Sinclair v. 'Brougham itself. Furthermore, the notion of fictitious contract serves only as a brake. As applied by English judges, it says when a quasi contractual obligation cannot be applied, but even 'where the fiction is possible, it can never say when the court should imply an obligation. As Jackson puts it," aequum et bonum was, a material source of the obligation, but the formal source was a contract implied by law. So the question, when a contract will be implied, remains open, and has to be answered by some other tests about which English law has hitherto been sadly vague and oscillating, as both Professor Winfield" and Mr. Jackson37 have shown. Nor is clarity increased -by the difficult methods which the House of Lords had to adopt in Sinclair v. Brougham, to obtain an equitable result, after it had rejected the applicability of a count for money had And received." A recent judgment by Lord Wright lends support to that suggestion. Brook's Wharf and Bull Wharf v. Goodman Bros.3 1~ is in itself not a case of great importance. The plaintiffs, warehousemen, had been compelled to pay customs on goods, imported by the defendants, and stored by the plaintiffs under a contract of bailment. Their action for refund was successful,. since it was a clear case of money paid to the use of the. plaintiffs. However, the relations between' the parties were covered by a contract of bailment, and if the principle pro- as Loc. cit., p. 140. 3s Op. cit., p. 119. as Op. cit., p.'139 -141 37 op. cit., p. 120 - 121. " 3s Cf. infra., 39 [19371 1 K.E. 534.

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nounced by Lord Parmoor in French Marine v. Compagn-ie Napolitaine" had been followed, namely that the parties had not said anything about a refund and the court could not make a hypothetical contract for them, it is difficult to see how a remedy could have been given. Lord Wright, however, emphasized that this claim for recovery had nothing to do with the contractual relations of the party. He went on to say, that, whether an obligation was to be implied was merely a matter for the court to decide, according to what seemed just and reasonable; the defendants would be unjustly benefited at the expense of the plaintiffs, if they had not to refund the customs duties paid on their behalf. In other words, Lord Wright stressed the character of the obligation as imposed by the law and formu- lated as a test for the refund the unjust benefit of the defendants at the expense of the plaintiffs. This is the very formula used for the principle of unjust enrichment in German and other continental systems.41 The difference between "just and reasonable" and "ties of natural justice and equity" is one of style rather than of substance. But if this distinction reflects a difference in outlook between 1760 and 1937, it is certainly less marked than the gulf between 1914 and 1937. The judgment of Lord Wright (;a) rejects the theory of fictitious contract as it had been applied, in particular since Si-nclair v. Brougham; (b) states that the true test for imposing quasi-contractual obligations is what appears just and reasonable, and (c) suggests unjust benefit as a guide for what is just and reasonable. The most recent observations on the scope of unjust enrichment in English law are found in the dicta of Greene M.R. and Scott L.J. in Morgan v. As)acroft.411 The actual decision should be beyond controversy. A bookmaker sought to recover from a client an overpayment made under a mistake of fact in settling the account. The principal ground for the decision in favour of the defendants -which would have been quite sufficient in itself-was, of course, that gaming transactions do not create legal obligations, whether payment or repayment is in question, and the court could not therefore go into the accounts of the parties. But both learned judges took the opportunity of examining the scope of actions for money had and received. Both found -what again should be beyond doubt - that a mistake of fact with regard to a payment which the law considers as voluntary, cannot be the basis of an action 40 [19211 2 A.C. 494. 41 Cf. 53 L.Q.R. 449. 42 [19371 3 All E.R. 92.

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for money paid by mistake. Such a mistake is not "fundamental" to the transaction.43 But both judges made further . observations of a jurisprudential character on the nature of the money counts. - Sir W. Greéné, was slightly more emphatic in rejecting Lord Mansfield's views -on the lines of Sinelair v. Brougham than Scott L.J.-: the latter; while rejecting unjust enrichment "as a universal or complete legal touchstone whereby , to test thi,s cause of action", was sceptical about Lord T3aldane's criterion44 that the fiction of an implied . contract could only, be stet ûp with effect if such a contract would be valid if it really existed. Scott L.J. thought that common principles for causes of action called "implied" should be found and that they should not exclude the principle of unjust enrichment. Such, roughly, is the state of English law at the present moment - clearly one of conflicting tendencies and of growing doubt in the sanctity of legal principles as confirmed by Sinclair v. Brougham?5 An analysis of the principle of unjust enrichment in English law, although it may derive encouragement from the last quoted judgments as well as from the recent studies of Winfield, Gutteridge and Jackson, must-- proceed cautious17. A comparative study . of the principles in other systems, where it is far - developed, should help. The problem is, howeverb closely connected with both the- technical structure and the legal policy of the system of law, and both these aspects have to be investigated . , Comparative observations on the -principle of ..unjust enrichment as it functions (a) in German law, -a; codified system, and (b) in -American law, a system sprung from the same roots as the English law, with a similar technical structure, should help us to see the problem in English law in its true significance.46

GEftmAN LAW The German law of unjust enrichment is codified in arts. 812 - 822 of the Civil Code and therefore did not have to be 43 Scott L.J. at p. 105. 44 In Sinclair v. Brougham, [1914] A.C.- at p . 415, 45The learned author of an article in the Solicitor (1937), p. 199, in. reviewing recent cases on payments under mistake of fact, sighs for Lord . Mansfield's broader principle . 45 This study is merely meant to give -a general outline of problems many of which will require more detailed investigation. The following observations do not aim at giving a complete summary of German and American' law but are confined to problems of special comparative importance. For a fuller comparative treatment of German, American and English law compare FRIEDMANN, BEREICHERUNcESHAFTUNG IM AN"LO- AMERIKANISCHEN RECHTS IN VERGLEICHUNG MIT DEM DEUTSCHEN BIJRGER- LICHEN BECHT. (Berlin, 1930) .

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freely developed by law courts as in France-17 It is all the more interesting to see that the results achieved are largely the same. The action for unjust enrichment is an important and indis- pensable part of German civil actions. It serves as a corrective in innumerable transactions, in a two-fold way : (a) as a corrective to the "abstract" transfer of title in property (whether in money, specific chattels or land) ; (b) to re-adjust pecuniary advantages obtained by one person at the expense of another in some other way. This side of the principle covers all those oases where the benefit has been obtained, otherwise than by transfer of property direct from A to B. It covers benefits obtained by such acts as spec-ificatio or conversion or erroneous registration as an owner of land (in certain cases where the property right has been acquired) or any other way by which B has obtained benefits which he ought to refund to A.4$ All these various groups are held together by the element of causa. Lack or failure of cmcsa gives rise to an obligation for refund." At the outset, therefore, there is the question what legal cause means, and this provides the key to an understanding of the function which the action of unjust enrichment exercises in German law. Causa has been defined by an eminent German jurist" as the legal object of a transfer of values. "Causa is determined by the legal relations between the parties, not by the economic purpose of the performance." In this lies the chief theoretical difference between causa and consideration. If A pays money to B, he may do so because he owes it to him (causa solvendi), or because he wishes to make him a loan (causa credendi), or because he desires to make him a gift (cav,sa dona-ndi) . In practice, the difference between consideration and causa was originally two-fold. The element of adequacy, which in the earlier stages of the development, was inherent in consideration, but has now disappeared except from certain parts of equity, is one difference. The peculiarities of the doctrine of consideration, such as the insufficiency of past and moral considerations, or the principle that consideration must move from the promisee, constitutes a second difference. The disappearance of the 47 Cf. David in 4 Camb. L.J. 205 - 223. 4$ For instances see infra. 48 It is often said by English and American writers (Lorenzen, 23 Yale L.J. 621 and following; 8 HOLDSWORTH, HISTORY of ENGLISH LAW, p. 43, that causa is no element of contract in German Law, but although causa need not be shown to constitute a valid contract, the absence of causa creates an obligation to restitute or to refund. ba See TuHR, ALLGEMEINER TEIL DER $ÜRGERLICHEN RECHTS, III p. 63.

1938] Thë Principle of Unjust Enrichment 255 .

element of adequacy in the common law was - a first step towards assimilation . The disappearance. of the . peculiarities Committee5onwill be another, if the report_ of the Law Revision becomes law. This shows that causa differs from consideration only in so far as the range of valid causae is much wider than that of valid considerations (!â difference which would Almost completely disappear if. the recommendations of the Report= aria adopted) ." Recovery for lack of causa would correspondingly cover a smaller range of cases. But the chief importance of lack of causa as a condition for recovery lies in the abstract nature of transfer of title and property (whether money, chattels or land) in German law. A useful illustration is provided by the way in which German law deals with specificatio. Specification by work done with another person's material transfers the property of the whole to the person who has specified . The,former owner of the thing or the material has a claim for recovery of money in proportion to the value of his . former property. The same applies to many similar problems. Wherever title to property passes to someone beyond what he has a legal cause to retain, he has to refund the excess according to principles of-unjust enrichment. It is of great comparative interest to analyse the principal ways in which, in German law, enrichment may be obtained unjustly at the expense of another. . 1. The ordinary case is that of the plaintiff himself having transferred something to the defendant without cause. Analogous categories in English law are payments made under mistake, duress, or compulsion, or for a ,consideration which fails. But the important difference is that in German, law, the rule applies equally to money, specific chattels and land. The majority of transfers made without causa are, of course, transfers made by mistake. But German law emphasizes the objective element, and in a special section" excludes a recovery, if the plaintiff was not influenced by mistake. This amounts to . a shifting of the burden of proof, as compared with English law. 2. The plaintiff may have enriched the defendant by transfer of property to a; third person. The chief example is payment of the defendant's debt by the 'plaintiff. Analogous categories, again purely within quasi-contract, are payments At the request of another and the compulsory discharge of another's son See 15 Can. Bar Rev. 585. si See Modern Law Review, Vol. I, p. 97. ,62 Art. 814.

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liability. The important difference, to which we shall have to refer again in another connection, consists in the fact that, in German law, the discharge of another's debt, even without the debtor's request, creates an obligation to refund. 3. The defendant may have acquired the benefit by his own action (e.g., by specificatio) or by consuming the plaintiff's property. In English law specificatio is dealt with by means of judicial orders, without a definite legal principle, although in substance the result is that the two parties will retain according to the respective value of their material and work." Consuming the plaintiff's property is a case of conversion, and the benefit may be recovered by means of waiver of tort. 4. The defendant may have sold another's property unlawfully to a third person, so as effectively to transfer the title to that third person." In that case German law gives a claim for unjust enrichment to the former owner against the seller for the proceeds, and a claim against the third person only if he has not acquired for value. Far an analogy in English law, we must distinguish between money, specific chattels and land. (a) For money there are some special rules, according to which, by means of a number of fictions, the original owner may follow the property through various metamorphoses as long as it is identifiable,," and in equity he may even follow his money "beyond the verge of identification" .',' This remedy is stronger than any corresponding remedy in German law. It is founded on property and can be proved against the assignee in bankruptcy." The equitable remedy, however, presupposes some sort of fiduciary relation between the parties, although such relation will be implied in a wide range of cases. (b) In the case of specific chattels, unlawful sale of the plaintiff's property constitutes conversion, and the proceeds can be recovered. Against a third person, who has acquired the title, e.g., by sale in market ouvert, or by obtaining the goods or documents of title," there appears to be no remedy analogous to German law. Furthermore, conversion is a tort,;although absence of fault will exclude the remedy only in a few cases," and an action for conversion will therefore not lie in all cases. Whether specific chattels might be recovered as the subject matter of a construe- 43 Cf. WINFIELD, TEXT-BOOK OF THE LAW OF TORT, p. 351. 54 Art. 816, German Civil Code . 55 Taylor v. Phoner (1875), 3 M. & S. 562. 55A Sinclair v. Brongham, [1914] A. C. 452. 56 Taylor v. Platm.er, supra. 67 Sec. 25, Sale of Goods Act. 58 Cf. SALMOND (STALLYBRAss) TORTS, 578.

1938] The Principle of -Unjust Enrichment . 257

tive trust, is an open question in English_ law. There. is no theoretical reason against it. - (c) In the case of land, a- strict analogy is difficult because of_ the particular relation -between legal and equitable rights in the law of real property. Situations analogous to Art. 816 can only arise where a trustee sells trust property to- a third person. In that case the cestui que trust can claim from the trustee-the proceeds obtained through unlawful handling of trust property, - e.g., land.59 From- the third party trust property - can be recovered, unless he is a bona fide purchaser for value. 5. Unjust enrichment , may be caused by an official act, e.g., priority given erroneously in the registration of rights in land or by. erroneous apportijonments in . public auctions. -For this there is no analogy in English law. - 6. Apart from these typical cases, "the categories of unjust - enrichment are never- closed" . Any other enrichment of one- party at the expense of another may give rise to an obligation to refund : so the use of the plaintiff's property, -without taking , it away from him. Just as a transfer of property in German law follows the same principle, whether money, chattels or land are in. question, the object of recovery is always -the same: primarilFy it is the object itself and secondarily, its value. In the case of money, of course, it is in practice the value which is recovered. When services have been rendered, from the-nature of the matter it follows that the value only can be recovered. There are, of course, various categories of transfer of property without cause, and the principal examples are provided by the various condictiones as known in Roman law. German law has not attempted to define generally lack or failure of causa, but the above stated division into the various ways in which enrichment may be obtained, should make the position fairly clear. Whenever the plaintiff has transferred something to the defendant, for a consideration which has failed, the lack - of causa lies in the absence of the legal obligation to do so. Whenever enrichment is caused by the defendant's own action, either by interference with the plaintiff's property or by encroach- ing -upon his legal rights in any other way, such action will lack a legal cause, unless the defendant can show a special right. In both these types of cases, English law would look- at it in the same way, except that it would lay emphasis on the subjective-mistake, i.e., the element of will, not on the objective absence of an obligation. When the plaintiff has enriched the 59 Hopper v, Conyers (1866), L.R. 2 Eq. 549 .

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defendant by transferring property to a third person, e.g., by paying the debts of the defendant, we shall see that there is a contrast of legal policy between the two systems. German law grants an action for unjust enrichment whenever one person is enriched without an obligation on behalf of the other. English law is not, as a rule, prepared to help a man who enriches another without having been asked or compelled to do so." Once the significance of lack of causa is understood, the remaining elements of an action for unjust enrichment, as developed by German law (and, on similar lines, by French, Italian and Swiss law) are easy to understand. The main thing is to explain the elements of enrichment on one side and loss on the other. They are the two sides of a balance suspended by causa. The existence of a general notion of enrichment has enabled German law to develop the action to great elasticity and to cover a great variety of situations. Enrichment may consist not only in money or chattels or land or services obtained "without just cause" ; it covers also the saving of expenditure, either generally, or in the special case of the plaintiff having discharged an obligation of the defendant. A frequent example of unjust enrichment of this kind is the maintenance of a child or a wife whom the defendant is in law bound to maintain, or the carrying out of repairs by the tenant in a house which it is the obligation of the landlord to keep repaired. The enrichment is measured by the net result of what the defendant has obtained in comparison with what he ought to have obtained." What this means may be illustrated by an American case, Kingston. Bank v. Eltinge," where both the plaintiff and the defendant had claims against a third person. Some property of this person was attached and sold for the benefit of the creditors of the plaintiff, and the proceeds were allotted to the defendant under the erroneous assumption shared by the plaintiff, that the defendant had priority. In fact, the defendant had no priority, but in consequence of the satisfaction thus received, he had released another right on the property of the third person. The loss thus suffered annulled the unjust enrichment received out of the first transaction. Since the obligation is one for the refund of enrichment as distinguished from damages, the obligation ceases where the so See infra. r, This is quite in accordance with the decision of Lord Mansfield in Dale v. Sollet (1767), 4 Burr . 2133, where he said that all the plaintiffs could ask for was what remained after deducting all just allowances which the defendant had the right to retain . 62 (1876), 66 N.Y. 635.

1938] The Principle of Unjust Enrichment 259

enrichment ceases. Suppose that an official who has received too much salary, has used the surplus to increase his'expenditure. In that case, he is no longer enriched and has nothing to refund. The same applies when the object of enrichment has been lost." A very interesting application of this elastic conception of - enrichment, suited to meet the requirements of all cases, lies in the extension of enrichment to intangible advantages which- could not be easily counted in cash, and are . therefore not covered by the less elastic counts for money had and received. Thus, in German law, where registration of title and rights in land is compulsory, the mere advantage gained by priority of position in the land register, may be an unjust enrichment, and so is the better trading position obtained by unfair competition,_ or the corresponding position obtained by unlawful utilization of a patent. The object of these extensions of the action is clear : it makes-it possible to readjust the position without the plaintiff having to wait until he_can sue for damages or account, which will often not be possible until considerable time has elapsed and the injustice done is more difficult to repair. The same extension has - taken place in the interpretation of the loss caused to the plaintiff by the enrichment of the defendant. Here a corresponding problem arose : Had the impoverishment . to be one which could, so to' speak, be measured in cash, or is it sufficient that the defendant has acquired a position which ought to have been held by the plaintiff. . Obviously, if the acquisition of a better position in the land register or in trade competition may be an enrichment, the corresponding loss of position on the other side must be an impoverishment, and so f it is held in German law. But a further problem arises : what if the defendant has gained an advantage without just cause, by using the plaintiff's property, but, without causing an actual loss to the plaintiff. This very question arose in Phillips v. ' Homfray,s4 and an almost identical case was decided, but with a different result, by the German Supreme Court." The defendant had used a railway line belonging to the plaintiff without the -plaintiff's permission. No loss had been caused, nor was there a trespass. This is a difference. from Phsllips v. Homfray where the question of unjust enrichment could only be discussed because there was a tort which could be waived. The German court decided that the defendant was enriched at the plaintiff's 63 In the United States, the same problem is treated under "change of position", and general equitable principles are applied to its solution . See infra. 64 24 Ch. D. 439. 66 R. G. 97, p. 310 .

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expense since, if he had proceeded lawfully, he would have had to pay the plaintiff for permission to use the railway. Here the difference between damage and enrichment at another's expense comes out clearly. It also follows that, in German law, the amount of enrichment need not strictly correspond to the loss of the other side. The plaintiff's loss was measured in relation to the particular action and benefit obtained by the defendant. To leave the plaintiff without a remedy in such cases, no doubt leaves an elementary sense of justice unsatisfied, and it is precisely in such cases that an action for unjust enrichment can have a salutary effect. Obviously there must be some limit to the right of a person to recover a benefit from other people. How far is it possible, where there are successive legal transactions dealing with the same object, and the result that the loss suffered by the first in the chain has produced a benefit in the person of the last? The German courts have decided this question in the sense that the shifting of the balance between the plaintiff and the defendant must be direct, i.e., that there must not be an independent transaction intervening between the plaintiff's loss and the defendant's gain. This problem is really identical with the question discussed above, whether what the defendant has obtained, he has obtained without cause in relation to the plaintiff. For the action for unjust enrichment is clearly an action in personam, and whether the defendant's enrichment is unjustified in relation to someone else, is irrelevant. The section of the German Civil Code dealing with unjust enrichment is also referred to in many other parts of the Code, whenever the law demands a restitution of the benefit in the course of some particular legal relation. So when one party to a contract has performed his part, and the performance of the other party becomes subsequently impossible." Or, when an improvement has been made upon chattels or land by someone other than the owner. One point requires special mention. A claim for negotiorum gestio is known to German law, but it is not based on unjust enrichment (as in American law). Unjust enrichment, in that case, merely represents a minimum obligation. When B is not bound to indemnify A, because A's interference was not in B's interest, he is at least bound to restore any benefit obtained by A's action. The foregoing observations on the principle of unjust enrichment in German law show that the principle has a wide and es Sec. 323 B.G.B.

_ 1938] The Principle of Unjust Enrichment - 261

general function. In fact, - it is a kind of subsidiary claim put forward whenever the plaintiff cannot get' what he wants by other actions, e.g.,- for damage, account, or by actions in rem arising out of ownership. Yet the danger of vagueness cannot be said to have become serious. Courts and lawyers in general have put a check on it." It should be evident from - our brief survey of German law - that the treatment of unjust enrichment depends primarily on two questions : 1. The technical structure of the law. 2. Principles of legal policy.

TECHNICAL STRUCTURE OF THE LAW

In this respect, English law offers three principal problems : (1) The function and meaning of consideration as compared with causa. ` (2) The _radically different treatment of transfer of money, specific chattels and land. (P.) The division between Common Law and Equity. (1) Causa and consideration.-Recovery of unjust enrichment, in German law, depends, as we have seen, on a lack or . failure of causa. Two differences are evident :, (a) Consideration is , not the same as causa; (b) Causa is not required as an_ element of contract, but consideration is. _ ,(a) - The difference in the meaning of causa and consideration may be of some importance in judging what is a valid' causa .or a valid consideration, but it would -not effect a claim for recovery when the one or the other is found to be absent. The differences in the meaning of the two notions amount, as we have seen, in substance to the inclusion in causa of what would be moral or past consideration, and 'of the absence of the idea of an economic equivalent in causa. Now the idea of economic adequacy has long disappeared from consideration, except nominally, and with somewhat farcical results." The other differences will be abolished, should the recommendations of the Law Revision Committee be adopted by Parliament." 67 Cf. on the similar position in French law, David, (1934) Camb L.J., pp. 205 - 223 . 68 Cf. Foakes v. Beer (1884), 9 App. Cas . 605, and Couldery v. Bartroum (1881), 19 Ch. D. 394. 69 On this question see Modern Law Review, Vol. I, p. 97.

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(b) Here again the difference, superficially considerable, is not really essential for our problem. Although causa is not required as an element of validity in the German law of contract, this means nothing but that any lawful purpose may be the object of a contract, without there being a necessity of specially mentioning it. Moreover, where a promise has been given without a causa being mentioned, anything done in fulfilment of this promise can be recovered if the claimant can prove that there was, in fact, no causa.71 If property is transferred from one party to another without causa, e.g., under a contract void but believed to be valid, or without a contract, there will be a claim for recovery. The essential question seems to be whether anything analogous to lack or failure of causa would, in English law, constitute a test for recovery. Firstly, it must be made clear that such test certainly cannot be found in the so-called "failure of consideration" . Recovery for failure of consideration comprises only such cases as, in German law, would constitute one special kind of condictio -Condictio causa data causa non secuta. The chief example is that of one party under a contract having performed and the other party failing to perform, e.g., for reasons of subsequent impossibility. Whether a claim for recovery in such cases is contractual or quasi-contractual, need not be discussed here. In German law the question is treated under contract, but with reference to the provisions for unjust enrichment." Secondly, the majority of claims for recovery are not treated in English law by reference to causa, but by reference to mistake, or compulsion, or fraud, etc. This amounts, as we have seen, mainly to a question of the burden of proof. Mistake, compulsion, undue influence, and similar categories, constitute the English way of stating that there is no justification for the transfer of property from one person to another. Again, where the benefit is obtained in some other way, e.g., by money paid at the request of another, or by the compulsory payment of another's debt, one might speak in English law, as in German law, of a lack of causa, in the sense that there is no justification for the defendant retaining the benefit. As regards transfer of property under mistake, the group of the greatest practical importance, it is useful to distinguish between two types of mistake 70 Art. 812 B.G.S. 71 Art. 323 German Civil Code.

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1. Mistake as to the existence, validity, enforceability of a contract, under which the plaintiff has performed. (Illegal - contracts-offer some special problems, owing to reasons of public policy.)" In all these cases the recovery for money had and received depends on questions of contract-. If the contract was void for lack of consent, mistake as to the existence of the subject matter, or mutual mistake as to the foundations - of the contract; the money may be recovered, but only after the contract has been rescinded." 2. Mistake as . to the facts which would constitute _an obligation to transfer, if true. Here the mistake does not refer to' the contract itself. A useful illustration is provided by the facts of Norwich Union v. Price.74 An insurance company pays_ under a valid policy, erroneously believing that the facts have occurred which would oblige, them to pay. In reality, however, the insured, cargo had not perished on the seas as assumed, but had turned bad, an event not covered by the, policy. The mistake may be altogether outside contractual relations, as, for example, when A, mistakenly believing that he has consumed B's goods, sends him money in payment, and afterwards discovers that the goods did not belong to B. It is on similar lines that American text-books On quasi- contract and the Restatement on Restitution have arranged the various cases of recovery where money, had been paid by mistake. A recent controversy between Landon and Tyler" bears. on the same problem. In Bell v. Lever Bros." the question whether Lever Bros., could recover money paid to former directors under an agreement which they contended was void for mutual mistake. Lord Atkin, in his judgment, discussed the whole question of mistake, and Mr. Landon suggested that these remarks were in the nature of obiter dicta, since the object was recovery of money and not validity of contract. Mr. Tyler replied that for the question 'of recovery it is necessary to discuss the validity of the underlying contract. Unless one still thinks, as Mr. Landon does, in terms of forms of action, thiis is convincing. Altogether, the differences in the -meaning and function of causa and consideration should, even apart ,from the -impending statutory changes, not have an unduly deterrent effect. We 72 Cf. Berg v. Sadler & Moore, [1937] 1 All E.R. 637. 73 Towers v. Barrett (1786), 1 T.R. 133. 74 [19341 A.C. 455. 76 In 51 L.Q.R. p. 650 and 52 L.Q.R. p. 27. _ 76 [1932] A.C. 161 .

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have seen that German law has not attempted to give a general definition of lack of causa, and that the main categories are (1) Direct transfer from plaintiff to defendant - dealt with in English law under recovery of transfer by mistake. (2) Appro- priation by the defendant's own action - dealt with in English law by various means, such as conversion, waiver of tort, constructive trust, judicial orders. (3) Benefits obtained by the defendant in some other way, which would be subjected in English law to a similar test as in German law, namely, whether the defendant had some special right to acquire the benefit. In the absence of such right, he ought to refund -although in English law as it stands now, many situations of this kind are still entirely unexplored. American law, by co-ordinating recovery of money and other benefits paid by mistake, and restitution of land by means of constructive trust, seems to arrive at similar results as German law 77 (2) The different treatment of transfer of money, specific chattels and land.-Far greater difficulties seem to arise from the fact that the transfer as well as the recovery of (.a) money, (b) chattels, (c) land, seem to have developed in English law in completely different channels. Whatever the difference between the treatment of moveable and immoveable property may be in German law, for the purposes of recovery because of lack of causa, i.e., by an action in persanava as distinguished from an action in rem, there is no difference in principle. It is a necessary condition of an action for unjust enrichment that title has passed; for otherwise the action will be in rem, founded on property." Since there is a general action for unjust enrichment, German law can make the passing of title and property independent of the legal obligation for it. Nor does German law attempt to maintain this strange fiction, so important in English law, that property in money may be retained through many metamorphoses. An action for recovery of money, unless it is for specific coins, is always a co-ndict-io, not a vindicatio. Now the question whether and to what extent claims for recovery of money, specific chattels and land could be treated under a common principle in English law, is very difficult indeed. Here, if anywhere, Maitland's famous words are true, that the forms of action still rule us from their grave. Historically, 77 Cf. American Law Institute's Restatement on Restitution and Unjust Enrichment. 78 There is, indeed, a condictio possessio7cis, where mere possession has been transferred ; but it is of little significance, in view of the stronger remedies based on property or former possession.

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undoubtedly, there -is little in common between 'these three kinds of property. Claims for recovery of money develop out, of indebitatus -assumpsit, and - the petendwrïz _ is a money count for money had and received or paid . to the use ofthe- plaintiff. These claims, as a rule, are certainly not claims for the recovery - of property, but claims for' an amount equal in value, in- the nature of an obligation in personam. On the other hand, actions for the recovery of specific chattels as well as of specific pieces of land, have been and are considered as property. actions. . Whether it be detinue, trover or trespass, _the injured right is property, and even where the injury to property can be pursued by an action in tort, it is still- the property right which is injured. The _ alternative is between recovering - the specific chattel or land or recovering damages (in some cases the value) by -an action based on the injury to property." (a) Rec_oWry of money.-In the ordinary case of recovery for money paid by mistake, or in some, other way, to the use of another, the question- of transfer of title is -of little practical importance.. The claim is for value. But there should" be no doubt that legal title to_ the money originally transferred has passed to the defendant. Otherwise the money could not be validly transferred to third parties, which would lead to absurd results. What Keener" said in 1893 on this question, should be - true for English law as well : "The title to the money must be regarded as vesting in the defendant, just as title to real estate is regarded as vesting in the grantee, where the grantor under- a - mistake as to his obligation to the defendant conveys to him by deed a piece of real estate." There is, however, very little . guidance on that point in English law. - A remark - by Lord Dunedin in Sinclair v. Brougham would seem to support Keener's view. Lord . Dunedin says : ""The case of chattels is easy. There is an action for restitution easily founded on the right of property. But when you come to. deal with a `fungible', the ius in re may disappear, and with it the appropriateness of the . 'common law action_ ." In Jones v. Waring & Cillow, Lord - :11 Sumner said _ -

If a tradesman misdelivers goods, so that the wrong person gets them, many laymen and all lawyers recognize at once that they do not thereby become theproperty of the receiver, for the passing of -- 79 Cf. HANBURY, EQUITY, 1st ed.,, p. 56 : "a plaintiff who is claiming restitution frames his action in rem, while one who is claiming repayment frames it in personam." - 8° QUASI CONTRACTS, p. 63 . - 81[1914] A.C. at-p. 431.' 82 [1926] -A.C. at p. 696.

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property is a question of intention, and obviously tradesman never meant in such circumstances to make his goods the property of the wrong man ...... In the case of payments of money, however, the notion is common that, if someone pays me money when he need not do so, it is my windfall, for I am not bound to keep his accounts for him . This is where the fallacy comes in. It is somewhat surprising that this remark should have been quoted frequently with approval, but without any attempt to elucidate its meaning and scope. although it is submitted that this is a very necessary task. With reference to Lord Sumner's dictum, Lord Wright in Norwich Union v. Price" seems to imply that, where payment is made under a mistake of fact as to the obligation, property does not pass. That remark can hardly mean title in the strict sense. The money counts are certainly actions in personain. The unfortunate looseness from which the use of the term "property" suffers in English law, especially where money is concerned, is probably due to the fiction established by the doctrines o£ Taylor v. Plumer"' and Re Hallett's Estate.,,' It is submitted that a distinction must be made between different cases of a man "paying me money which he need not do so" . It is essential to distinguish between such mistakes as nullify even the outward appearance of consent, and such mistakes as relate to facts constituting an obligation for payment. To the first category belong cases such as the example given by Lord Sumner, i.e., mistake as to the identity of the transferee or the object matter; to the second category belong all those cases which are well summarized by Farwell J. in In re Bodega Co. :" "If you are claiming to have money repaid on the ground of mistake, you must show the mistake is one which led you to suppose you were legally liable to pay." It would appear that, despite Lord Sumner's dictum, the transfer of title in money, in cases where recovery for mistake would be granted, is accepted as a matter of course, and such a conclusion seems necessary in the interests of commerce. It also follows, by argumentum e contrario, from the doctrines of Taylor v. Phoner$r, and Re Hallett's Estate,, " the application of which requires some special condition 1. Property in money, under the principle of Taylor v. Plumer, can be recovered as long as money can be identified, as

33 [1934] A.C . 462. 83A (1875), 3 M. & S. 562. $4 (1880), 13 Ch. D. 696. See infra. 86 [19041 1 Ch. 286. 36 (1815), 3 M. & S. 562. 87 (1880), 13 Ch. D. 696.

1938] The Principle of Unjust Enrichment 267

the relation of creditor and debtor has not superseded that .of ownership. 2. The equitable doctrine of Re Hallett's Estate, which goes "beyond the verge of identification" and assumes that the property right subsists even where the money has been so blended with other money as to have become incapable of being traced, presupposes a fiduciary relationship (although the range of fiduciaryrelationships as understood by Equity is'wide) .ss More- over, the fictitious - character of this so-called right of property must be clearly understood. By means of successive fictions, a quasi-proprietbry right is asserted in these cases. The money can be followed through various investments and, in the case of Re Hallett's Estate, even into banking accounts. But it is certainly not the identical coins or notes'which can be recovered, but the equivalent in currency, and there is no question that the title to the original money has passed to the transferee. Indeed; without such an assumption, these equitable doctrines could not -operate. Since English law, like any other law, lays stress upon the difference between_iura in rem and iura in personam, it would have been more conducive to clarity, if the fictitious character of these "property rights" had been more clearly recognized. In the application of 'the - principle of Re ,.. Hallett's Estate in Sinclair v. Brougham even the quasi-proprietory ,_ character was lost, since by means of, what was, in fact, plainly an equitable distribution, veiled by a series of fictions, the plaintiffs got an equitable share in the available- funds, pari passu with the unadvanced shareholders. All these fictions do not affect the plain fact that where A pays B under a mistake of fact regarding his obligation, title passes to the transferee and, from him, to the third person. ' (b) Recovery of specific chattels.-=The possibility of recovering specific chattels, except as property, or, in some special cases, -as an alternative to damages,89 has hardly been 'discussed in English law. Specific performance is a different matter ; it is not concerned with restitution of property but with- the delivery of specific things in performance of an obligation. Historically,' of course, it may he- supposed that, had specific performance been developed earlier the idea of specific, restitution of chattels, - apart from the recoveryof property, might also have been further developed.

88 On the whole question cf: HANBURY, ZOC. çit., Pp . . 56 - 63.' 89 In conversion cases, equity would order the delivery of chattels of special value, beauty or rarity ; Cf. Pusey v- Pusey (1684), 1 Vern. 273 .

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Quasi-contract, as Professor Winfield assures us,91 does not extend to the recovery of specific chattels." The Indian Contract Act does, in sec. 72, imply the possibility of such recovery ("money paid. . . . or anything delivered") . The comment on section 72 by Pollock and Mulla only deals with the recovery of money, but refers to sec. 86, Indian Trust Act 1882; "where property is transferred in pursuance of a contract which is liable to rescission, or induced by fraud or mistake, the transferee must, on receiving notice to that effect, hold the property for the benefit of the transferor, subject to repayment by the latter of the consideratipn actually paid." In American law, the extension of remedies for the recovery of payments made under mistake of fact to "land, chattels, negotiable instruments or chosen in action. is universally accepted" .,,' The comment on the Draft Restate- ment of Restitution and Unjust Enrichment states that "the cases are uniform in making no distinction between the payment of money by mistake and the transfer of chattels, or other things by mistake. Only the form of the remedy may be different." Is there any corresponding remedy in English law? Apparently not, in quasi-contract ."- The authorities are scanty and contra- dictory. There appear to be mainly two questions : (1) Is there a remedy for the recovery of specific chattels, not in the nature of a property action (i .e ., based on unjust benefit)? (2) Does the title in specific goods pass when property has been transferred under a mistake, which, if the object were money, would give rise to an action for money had and received? The answer to the first question seems to be in the affirmative. In Stocks v. Wilson" Lush J. said clearly that "the title in property fraudulently obtained by an infant, had passed to the infant, and that Equity bound him to restore it".94 In Pearce v. Bram, 91 where an infant could not recover a motor cycle exchanged against a motor car, Swift J. said : "I cannot see any difference in principle between the recovery of a chattel given in exchange, and the recovery of money paid as the purchase price of goods. The implication in both cases seems that property has passed."

99 PROVINCE OF THE LAW OF TORT, p. 183. 91 See also HALSBURY, LAWS OF ENGLAND, 2nd ed ., Contracts, sec. 387 . 91A Cf. See . 39, RESTATEMENT OF THE LAW OF RESTITUTION. 92 WINFIELD, 10C. Cit. 93 [1913) 2 K.B. 235. The actual decision was not overruled by Leslie v. Sheill, [1914] 3 K.B. 607. 94 It may be suggested that the appropriate construction to bring equity into play is constructive trust. 95 [19291 2 K.B. 310.

19381 The Principle of, Unjust Enrichment 269

These are infant cases. But there is no reasons, of legal - logic or policy, why, a recovery of specific chattels should not be possible, theproperty- in which has passed-to the- defendant, but under such circumstances as oblige him to restore what he has - got. This, of course, is indubitably the result in such different systems as German, American and Indian law. The answer to the second, question is even more difficult to ascertain. Lord Dunedin, in his above-quoted remarks in Sinclair v. Brougham, speaks of the action for restitution asbeing founded on the right of property, where chattels were concerned. - But the same considerations 'should apply here, which apply to the, observations of -Lord Sumner discussed above. It is necessary to distinguish between the- different classes of mistake. Thus, if the mistake be one as to the identity of the chattels or of the person of the transferee, there is no intention to pass title in that particular object or to that particular person. The same would apply to surplus quantities, e.g., where I agree to transfer a hundred bushels of wheat, but by mistake deliver a thousand. ' If, on the other hand, the mistake is one which leads me to suppose that I am legally liable to pay, title passes. If, for example, in Bell v. Lever" the defendants had received not money, - but a valuable picture or a motor car, could the plaintiffs, assuming that the contract would have -been -void for mutual mistake, have seriously contended that title in the goods had not passed.97 The question is of great importance to third purchasers. If the defendant has no title in the goods, he cannot transfer any to a purchaser." Section 22 Sale of Goods Act, indeed; gives a good title to a bona fide purchaser for value, fpm a seller with a title voidable, but not yet avoided, but if - the effect of the mistake were to transfer no title, there . would - not -be even a voidable title. Many of the leading cases on' mistake (e.g., Cundy v. Lindsay)"" and all the important cases on non est factum: are between a- defrauded person and a third purchaser. Against the fraudulent person, the victim could avoid the contract and have theproperty restored. But against abona fide purchaser he must show that his mistake operated to nullify not only the contract, but also -the passing of title. In the case, of negotiable instruments, both questions merge into one, the validity of the signa-

as [1932] A.C. 16],. . . 97 Landon emphasizes that the .-passing of property in chattels is governed by rules different from--those applying to money. 52 L:Q.R. 480 . 98 See. 21 Sale of Goods Act.. - 98A (1878), 3-App. Cas . 459.

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ture. In the case of goods the questions are distinct and ought to be so treated. Every law has to compromise between the desire not to divest property from a man against his will and the need of commerce to protect purchasers against insecurity of title. German, American and Indian law, to give only a few examples, have, in different ways, arrived at granting valid titles in those cases summarized in our second group, that is, broadly speaking, in all those cases where an intention to pass property exists, but is influenced by an error in causa. True, in German law, mistake does not make acontract void, but only voidable, whereas in English law a mistake, if it has any effect at all, makes a contract void. But this does not relieve English law from the necessity of investigating under what conditions property passes, whatever the personal obligations of the transferee may be towards the transferor. Nor is there any reason why, in that respect, the principles developed for innocent misrepresentation should not be applied analogously. Property often passes, even under a contract void ab initio. Some assistance for this contention may be derived from the established rule that property passes under an illegal contriact.99 The nearest approach to an answer to our question may be found in the judgment of Lord Cairns, generally accepted as authorita- tive, in Cundy v. Lindsay:loo

If it turns out that the chattel has come into the hands of the person who professed to sell it, by a de facto contract, that is to say, a contract which has purported to pass the property to him from the owner of the property, there the purchaser will obtain a good title, even although afterwards it should appear that there were circumstances connected with that contract which would enable the original owner of the goods to reduce it and to set it aside...... Lord Cairns then found that in the case before him, property had not passed, since the sellers never intended to deal with and deliver goods to the defendants, but thought of someone quite different. Surely, the position is not the same where property is transferred "upon the supposition that a specific fact is true, which would entitle the other to the money".lol It may be hoped that this problem-of no small practical importance-will receive more attention. The dictum of Lord Sumner in Jones v. Waring 8c Gillow certainly requires elucida tion. Mr. Lawson'" has recently analysed the different kinds of ss Elder v. Kelly, [1919] 2 K.B. 179. (Sale of Milk on Sunday) . 100 (1878), 3 App. Cas. 459. ioi Kelly v. Solari (1841), 9 M. & W. 54. 102 52 L.Q.R. 79 ,ff.

1938 The Principle of Unjust Enrichment 271 .

mistake with regard to the . validity of contract. A similar enquiry could -profitably be' directed to problems of recovery. Perhaps it may be added that the action fbr conversion, with the help of waiver of tort, makes it possible to recover specific things or their value from either the' wrongdoer or any third person, except from bona fide purchasers protected by Statute."' But wide as the range of conversion is, it certainly does not cover all the cases which are affected by our question. (c) Specific recovery of Land.-The idea of specific recovery of land as such presents 'no difficulty, to English lawyers. In fact, it was formerly the only case of specific recovery known. But does English law know the recoveryof land in cases analogous to quasi-contractual claims for the recovery of money? What answer there is to that question, is given by - Equity. Equity has strongly modified the law of contract, especially of mistake, by its remedies of cancellation, and rectification. Numerous decisions deal with rectification or cancellation of instruments embodying agreements to transfer property. Equity's main function is that of prevention. But equity will also rectify a conveyance_ after completion and recoveey land transferred without justification. The principle of Angell v. Jay, 194 according to which, short of hpaud, conveyance of property settles the relations between the parties' finally, is confined . to cases of innocent misrepresentation .los Thus, in Williams v. Bayley"s a mortgage was rescinded which A had executed in favour of B on the grounds of undue influence. In White v. White"' the court rectified a conveyance which, by mistake, covered only half the estate intended to be conveyed. (That is not a case of restitution of unjust benefit. It is the reverse). In Beale v: Kyte"I a conveyance which included by common mistake parcels not comprised, in the written contract, was rectified after six years.l99 American law, as the Restatement of the law of Restitution shows, is not troubled by the difference between recovery of money, chattels and land. In the case of land, the remedy granted where the ,transfer was not justified, is called rèfor- mation. 119A Some instances of special practical importance are 103 Sale of Goods Act, Bills of Exchange Act, Factors Act. 394 [1911] 1 K.B. 666. 105 WILLIAMS, VENDOR AND PURCHASER, 3rd ed., p. 787 . 106 (1866), L.R. 1 H.L. 200., - 107 (1872), L.R. 15 Eq. 247. 108 [19071 1 Ch. 564. 10 9 In a similar case of mutual mistake rectification was granted in Clark v. Barnes,. [1929] 2 Ch. 368. 199A Cf. RESTATEMENT, sec . 39. -

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1. A transfers to B land in exchange for an annuity upon the life of C, whom both A and B believe to be living. In fact, C is dead. 2. A agrees to convey to B a particular strip of land for a fixed price, according to description. By an error in survey- ing, an additional field is included in the conveyance. B resells the land, including the additional field, and obtains a correspondingly higher price. In this case, there appears to be no way by which, in English law, A could recover from B the proportion of the price which represents the value of the field erroneously included in the conveyance, although this clearly results in an unjust benefit for B. American law, in these cases, helps with the implication of constructive trust, applying principles of unjust enrichment analogous to those where money or specific chattels have been transferred ."' To what extent it might be possible to use constructive trust for similar purposes in English law, will be discussed below. The conveyance of land by mistake, or otherwise without legal ground, raises, then, problems similar to the transfer of specific chattels. But the problem should be even more obvious, since in conveyancing the difference between the obligation to transfer and the transfer itself is generally marked by two separate deeds, and cases of divergence between these deeds are not rare. W. FRIEDMANN. London, England. (To be continued.)

110 Cf. infra.