<\/p>\n
Restitution \u201cat the claimant\u2019s expense” requires that the claimant\u2019s loss correspond exactly to the defendant\u2019s gain<\/p>\n
Introduction:<\/p>\n
We all know that there is a significant distinction between restitution of an unjust enrichment and restitution for wrongs. Therefore, \u201cat the claimant\u2019s expense” is also used in different sense for the restitution of an unjust enrichment and restitution for wrongs. When \u201cat the claimant\u2019s expense” is used for the restitution of an unjust enrichment it means by subtraction from the claimant. For example, if A mistakenly pays to B \u00a350 then defendant\u2019s gain of \u00a350 is by subtraction from the claimant of \u00a350. However, if \u201cat the claimant\u2019s expense” is used for restitution for wrongs then it simply means by doing a wrong to the claimant. For example, if B pays \u00a350 to A to beat C then C can only claim \u00a350 from A by showing restitution for wrong of trespass to the person. As the law of restitution developed more and more in recent years we are faced with two important issues that arise in relation to the \u201cat the expense of the claimant” in its subtractive sense. First question is of correspondence or equivalence between the claimant\u2019s loss and the defendant\u2019s gain. Second question is, \u201cWhat happens when there is a third party involved?” i.e. Can claimant have restitution against defendant where benefit has been conferred by a third party? [1<\/a>]<\/span><\/p>\n For the claimant to succeed in a claim for restitution he must show that the defendant has acquired benefit at his expense. First, it provides the plaintiff right to pick up the person who has been enriched at his expense out of the masses. Second, anyone cannot sue the defendant for unjust enrichment. Law is very clear on this and says that only the person at whose expense the defendant is unjustly enriched can succeed against him in a claim for restitution. [2<\/a>]<\/span> The courts in Chase Manhattan NA v. Israel-British Bank (London) Ltd held that the claimant must show that there is a connection between the defendant\u2019s gain and claimant\u2019s loss in order to succeed in a claim for restitution. [3<\/a>]<\/span> For example, If A is unjustly enriched at the expense of B then C cannot sue A and claim A\u2019s benefit. It is B and only B who can sue A and succeed in a claim for restitution.<\/p>\n It is generally seen that in claims for restitution there is equivalence between the loss of the claimant and the gain of the defendant. For example, if A mistakenly pays \u00a350 to B then B\u2019s gain of \u00a350 corresponds to A\u2019s loss of \u00a350. We can say that there is corresponding or equivalent plus and minus.<\/p>\n The courts in Re BHT (UK) Ltd held that there must be a correspondence between defendant\u2019s gain and claimant\u2019s loss. In that case: bank had a charge over the company\u2019s book debts. The company went into liquidation and the receivers paid money to the bank on the assumption that the charge was a fixed charge. Later it was held by the Privy Council that the charge was a floating charge and not a fixed charge and so the money should not have been paid by the receivers to the bank. Following the decision of the Privy Council, the company brought a claim for restitution against the bank and sought to recover the money under unjust enrichment. The company\u2019s claim against the bank failed. Following the principle of correspondence courts held that the bank was not enriched at the company\u2019s expense. It stated that after company\u2019s liquidation company was not entitled to the value of the book debts and thus did not suffer any loss.<\/p>\n However, this does not happen in every case. We know that in restitution for wrongs claimant can get more than his loss. This is one reason claimant will go for restitution for wrongs and not for normal remedy of compensation. But what happens in cases involving restitution for unjust enrichment? It has been established by the courts especially in cases where non-money benefits are involved that there need not be equivalence between the claimant\u2019s loss and the defendant\u2019s gain. For example, if defendant uses the claimant\u2019s bicycle without permission for a day and returns it undamaged then the defendant\u2019s enrichment may exceed any loss suffered by the claimant. [4<\/a>]<\/span> In BP Exploration Co (Libya) Ltd v. Hunt (No.2), Robert Goff J said that where the benefit does not consist of money, the defendant\u2019s enrichment will rarely be equal to the plaintiff\u2019s expense. [5<\/a>]<\/span><\/p>\n The courts in Kleinwort Benson Ltd. v. Birmingham City Council held that correspondence between the defendant\u2019s gain and claimant\u2019s loss is not necessary for the claimant to succeed in a claim for restitution. In that case: under the interest rate swap agreement the plaintiff bank paid a net sum of \u00a3353,321.91 to the defendant council over the five years from September 1982. It subsequently became clear as a result of a decision in a separate case that the agreement is ultra vires the council and void. The bank brought an action for restitution of the money. The council sought to amend its defence and counterclaim to plead that it would be inequitable to order restitution because the sum the bank had paid out under the void agreement had been made good by the proceeds of hedging contracts in the money market. The judge refused leave to amend and gave final judgement in favour of the bank. [6<\/a>]<\/span><\/p>\n On the other hand, it is not sufficient to say that defendant\u2019s gain is at the expense of the claimant simply because there is \u2018But for\u2019 a causal link between defendant\u2019s gain and the loss of the claimant. This is for the simple reason that it will extend the ambit of cases falling under unjust enrichment too far. The courts in Sempra Metals v. IRC held that the claimant could not have recovered the profits made by the defendant\u2019s out of the mistakenly paid advanced corporation tax and the profits were casually linked to the subtraction from the claimant. Therefore, they were not gained \u201cat expense of the claimant”.<\/p>\n Generally, for the claimant to succeed in a claim for restitution against the defendant he must show that the defendant is unjustly enriched at the claimant\u2019s expense i.e. the defendant\u2019s gain has come directly from the claimant. This is known as \u201cthe privity principle”. For example, if the claimant has mistakenly paid \u00a350 to the defendant then the defendant\u2019s gain has directly come from the claimant i.e. defendant is unjustly enriched at the expense of the claimant. The same was held by the courts in Chase Manhattan NA v. Israel-British Bank (London) Ltd. The main rationale behind the privity principle is that the claimant who seeks to obtain restitution on the ground of unjust enrichment must show that he or she has a stronger claim to the value received by the defendant than the defendant\u2019s claim to retain that value. [7<\/a>]<\/span><\/p>\n However, there are certain \u201cexceptions to the privity principle”. They are-<\/p>\n Where the defendant has received property in which the claimant has proprietary interest the claimant will be able to bring a restitutionary claim against the defendant even though the defendant received the benefit indirectly.<\/p>\n Where the claimant\u2019s claim for restitution is founded on a wrong it is irrelevant that the defendant obtained a benefit indirectly and just by showing that enrichment is caused by the wrong committed by the defendant against the claimant, without any need to show that the defendant\u2019s benefit corresponds to the claimant\u2019s loss, is sufficient.<\/p>\n Where a benefit is transferred from the claimant to the defendant by the claimant\u2019s agent the claimant will be able to bring a restitutionary claim against the defendant even though the defendant is an indirect recipient of the enrichment. This is simply because the agent acts on behalf of his or her principal so the transfer is deemed to have been directly at the claimant\u2019s expense.<\/p>\n Where a third-party intends to transfer a benefit to the claimant but mistakenly transfers the benefit to the defendant instead of claimant. The claimant can bring restitutionary claim against the defendant to recover the benefit. One reason to allow this is to avoid multiplicity of proceedings i.e. instead of third-party claiming it from the defendant and claimant claiming it from the third-party, claimant can claim it directly from the defendant and thus the third-party is discharged from its liability to pay to the claimant.<\/p>\n Prof. Peter Birks introduced the theory of \u201cInterceptive Subtraction” to explain whether subtraction has occurred in situations where defendant has received enrichment from a third party. According to the theory of interceptive subtraction, if the wealth in question would have arrived in the plaintiff if it had not been intercepted by the defendant en route from the third party then it is true to say that the plaintiff has lost by the defendant\u2019s gain. The theory of interceptive subtraction is based on the element of certainty that the plaintiff would have obtained the wealth. For example, plaintiff owed money from a third party but third party paid money to the defendant, then according to this theory existence of an obligation makes it certain that the plaintiff would have received the money had it not been intercepted by the defendant. [8<\/a>]<\/span><\/p>\nAt the Expense of the Claimant:<\/h2>\n
Correspondence or Equivalence between Claimant\u2019s Loss and Defendant\u2019s Gain:<\/h2>\n
The Third Party Question:<\/h2>\n
Privity Principle<\/h2>\n
Restitutionary claims to vindicate the claimant\u2019s proprietary rights:<\/h2>\n
Restitutionary claims founded on wrongdoing:<\/h2>\n
Agency:<\/h2>\n
Three-Party Situation:<\/h2>\n
Theory of Interceptive Subtraction:<\/h2>\n