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Property, Subsidiarity, and Unjust Enrichment(3) |
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We might try to formulate the relevant principle by saying that enrichment claims are weakly subsidiary to primary contractual rights. This would reflect the general position that there can be no enrichment claim so long as there is a subsisting contract between the parties. Of course, this covers the case where there has been no breach of the contract; but it also deals with the position where there has been a breach, so long as the breach does not lead to cancellation of the contract. Even this, however, does not appear to be quite wide enough. Sometimes, umjustified enrichment is excluded even where there are no primary rights. This can be illustrated by Rillford Investments Ltd. v. Gravure International Capital Corp.51 The plaintiff's business was to broker mergers and acquisitions. The defendant wanted to be acquired and it entered into a contract with the plaintiff providing for the payment of a healthy commission to the plaintiff, should the plaintiff arrange for the acquisition of the defendant by another corporation. The terms of the contract provided that the arrangement would end after 60 days, but that the fee would be payable if the defendant were acquired within 365 days by a company introduced by the plaintiff. The plaintiff introduced a potential buyer, Graphic Corp., but no sale was agreed. Two and a half years after the agreement was executed, Graphic Corp. acquired the defendant. The plaintiff sued, relying on implied contract and unjust enrichment, but the claim was rejected. Although the contract said nothing about liability in unjustified enrichment, the court held that it "contemplated the possibility that the plaintiff would receive no compensation if the defendant was enriched by virtue of the sale of his business beyond the time of the expiry of the agreement." By the time all of the facts had occurred which allegedly generated an unjustified enrichment, there was no contract; there were no primary or secondary obligations. And yet somehow the contract excluded the enrichment claim. The decision was made under the common law, but one could expect a similar holding in each of the systems under consideration. If this be right, it follows that the unavailability of unjust enrichment in the contractual context cannot be understood through weak subsidiarity. Rather, the existence of a relevant distribution of risks and rewards between plaintiff and defendant excludes unjustified enrichment, even though the plaintiff has no other claim. This is strong subsidiarity.
At this point it must be observed that Stephen Smith has now argued that for the common law, there should be concurrent liability in contract and unjustified enrichment just as there is between contract and tort.52 The gist of the argument is the same as that which eventually prevailed in the debates about contract and tort: that is, the only question is whether the elements of the different causes of action can be established, and if they can, then both types of claim are available. Clearly, this argument depends on the absence of any governing principle of subsidiarity, and it must be assessed in the light of the justifications for this principle which are discussed below.
(b) Excluding Claims due to Relationships Involving Third Parties.In the previous section, it was found that where there is a relevant distribution of risks and rewards between plaintiff and defendant, then in general enrichment claims are excluded. Here we need to consider some slightly more complex situations, namely where there is no contract between plaintiff and defendant, but there is a contract between one or the other of them and some third party.
(i) Plaintiff's Contract with a Third Party.Consider first the case in which the plaintiff has a contract with some third party. This can be illustrated by the facts of the arrêt Boudier,53 the case in which the Cour de cassation recognized the actio de in rem verso as a general enrichment remedy. The plaintiff contracted with a lessee of land to fertilize the land, and did so. The plaintiff was unable to recover the price because the lessee was insolvent. The plaintiff sued the lessor, who by that time had taken possession of the land. Recovery in that situation on the basis of unjustified enrichment raises certain difficulties. The plaintiff entered into a legal relationship with the lessee which provided for the payment for the fertilizer, and, with his right to payment still intact (albeit impaired by the lessee's insolvency), he was allowed to recover from another defendant. The policies will be discussed further below,54 but it may be observed here that Challies noted that in two cases in 1939, the Cour de cassation disallowed claims in similar fact patterns.55 The Civil Code of Quebec seems clearly to deny recovery such a case, as art. 1494 provides, "Enrichment or impoverishment is justified where it results from the performance of an obligation." There is no stipulation that it has to be an obligation owed to the person who was enriched.56 If the plaintiff was performing an obligation, his impoverishment was justified, and under Quebec law (as in France) the claim lies only if both the enrichment and the impoverisment were unjustified.57
The common law does not seem to have found its way to any firm doctrinal rule, but most cases deny recovery in this type of situation. Canadian cases sometimes cite the plaintiff's contract with a third party as the "juristic reason" for the defendant's enrichment.58 Lord Goff has suggested that "the existence of a remedy in restitution in such circumstances must still be regarded as a matter of debate," but that "serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract."59 Dawson said that the denial of recovery was "almost unchallenged" in U.S. law.60 He said "almost" because he noted a line of cases in which lawyers were allowed to recover from those whom their work had benefited when they were unable to enforce their contractual claims. He was not overly impressed by the "success of American lawyers in escaping their self-imposed limitations";61 but Canadian lawyers seem to have taken up the torch. In Giffen, Lee & Wagner v. Zellers Ltd.,62 Zellers was sued in negligence by another party. The action was taken over by its liability insurers, who retained the plaintiff law firm. The plaintiffs arranged a tentative settlement and sent an account for $3,220 to the insurer, which by then had become insolvent. The law firm successfully sued Zellers for this amount in unjust enrichment. To be fair, there is at least one recent case allowing recovery where the plaintiff was not, so far as can be discovered, a lawyer.63
In Peter Birks' contribution to this volume, he takes the view that the reason the plaintiff cannot recover in a case like this is that the defendant's enrichment is not at the expense of the plaintiff. On our assumptions, though, the plaintiff can prove all of the elements of his enrichment claim against the defendant, and it is only the presence of the plaintiff's contract with another party which bars the claim. In other words, saying that the enrichment was not at the plaintiff's expense is just a conclusion of law which is reached by applying a principle additional to the basic one which requires only that the plaintiff conferred the enrichment on the defendant.64 The present paper is attempting to analyse this additional principle.
If we consider the position on this point in Germany, the law is absolutely clear; there can be no claim in unjustified enrichment where the enrichment was conferred pursuant to a contract between the plaintiff and some other party. As a matter of doctrinal development of the words of § 812 of the BGB, German law distinguishes between cases where the enrichment can be described as a "performance" (Leistung), and cases of enrichment in any other way. In this context, a performance means an enlargement of another's estate which is brought about intentionally and with a specific purpose in mind.65 "The concept ofLeistung serves as a compass in this territory; once one has found who has performed to whom, one will normally know the right plaintiff and the right defendant for an action in unjustified enrichment."66 The German rule of subsidiarity is that whenever there has been a performance, there can be no claim based on enrichment in any other way.67 If the plaintiff enriched the defendant pursuant to the plaintiff's obligations under a contract with a third party, then there has been a performance between the plaintiff and the third party. Any enrichment claim by the plaintiff against the defendant is excluded.68
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