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Property, Subsidiarity, and Unjust Enrichment(4) |
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(ii) Defendant's Contract with a Third Party.Briefly we can consider another type of case. What if it is the defendant who is in a contractual relationship with some third party, which relationship contemplates the provision of the enrichment by the plaintiff? One feature of this type of case is that even in the absence of any rule of subsidiarity, the claim may fail as the plaintiff may be unable to prove that the defendant was enriched. The defendant will be liable to pay, or will already have paid, the third party under the contract.69 On the other hand, in the common law at least, a defendant's attempt to deny its enrichment on the basis of dealings with a third party is usually understood as a matter of defence.70 This is parallel to the discussion above, in the case of the plaintiff's contract with a third party;71 the denial of recovery in such cases can be explained on the basis that the defendant's enrichment was not "at the expense of" the plaintiff, but the reasoning behind that conclusion must be unearthed.
Even though we are assuming here that the plaintiff was not bound contractually to anyone, this does not mean that the claim against the defendant is the plaintiff's only possible recourse. Why might the plaintiff have enriched the defendant? Although there are other possibilities, it is most likely that the plaintiff was attempting to fulfil its obligations under a contract with some other party which turns out to be void or unenforceable.72 This might be the same third party with whom the defendant contracted, or a fourth party. Under German law, since in this case the plaintiff was making a performance toward his contractual counterparty, his only claim will be an enrichment claim against that counterparty. Quebec law appears to generate the same conclusion. Liability for unjustified enrichment under art. 1493 is defeated if either the defendant's enrichment or the plaintiff's impoverishment is justified; under art. 1494, "Enrichment or impoverishment is justified where it results from the performance of an obligation." So in this case of defendant's contract with a third party, it could be argued that the defendant's enrichment is justified, since it resulted from the performance of the obligation of the third party.73 There is no stipulation that the obligation must be owed by the plaintiff. In the common law, there does not appear to have emerged any trend toward denying the plaintiff an enrichment claim against the defendant, but there are very few cases which are not also "combination" cases as discussed immediately below.74
(iii) Combinations.Many cases involve a combination of the plaintiff's contract with a third party and the defendant's contract with a third party. It might be that the plaintiff and the defendant each have a contract, but each has contracted with a different party. More likely, the plaintiff and the defendant have each contracted with the same third party. That is the case which arises where a building project involves a general contractor and subcontractors. The owner of the site contracts with the general contractor, and the general contractor contracts with subcontractors. If the general contractor becomes insolvent, can the subcontractors sue the owner in unjustified enrichment? There will often be legislative solutions to assist the subcontractors, such as the possibility of registering a real security interest in the land, or a statutory trust fund of payments made by the owner to the general contractor which is for the benefit of subcontractors. Such solutions are motivated of course by policies aimed at protecting the subcontractors, and cannot be seen as reflecting the general law.75 Moreover, such remedies cannot affect the enrichment claim except in a system with a wide-ranging subsidiarity principle.76Since this combination involves both a plaintiff's contract with a third party and a defendant's contract with a third party, it follows that if either of those configurations denies the plaintiff its enrichment claim, there can be no claim here. Some recent common law cases seem to support this view.77 Unfortunately, the simple denial of recovery in such a case does not make clear which of the two contracts is keeping the plaintiff from recovering.78
2. Weak Subsidiarity.The widest possible principle of weak subsidiarity would provide that a claim in unjustified enrichment was unavailable where the plaintiff had any other claim against some defendant. For example, if the plaintiff could establish all of the elements of an enrichment claim against the defendant, but it transpired nonetheless that the plaintiff held a tort claim against some third party, the enrichment claim would be disallowed. No system seems to have a principle as wide as this. An argument along these lines was made and rejected for Quebec law under the Civil Code of Lower Canada.79.The widest possible version of weak subsidiarity operating inter partes would say that if the plaintiff has any other claim against the defendant, unjustified enrichment cannot be used. This appears to be the law of Quebec, in respect of the general enrichment action, because art. 1494 of the Civil Code of Quebec provides that enrichment or impoverishment is justified where it results "from the failure of the person impoverished to exercise a right of which he may avail himself or could have availed himself against the person enriched."80 A general doctrine of weak subsidiarity of unjustified enrichment would explain the non-availability of an enrichment claim where the rei vindicatio subsists, the phenomenon observed for Germany and Quebec in Section II of the paper. An argument has been made that the common law takes a similar line.81
It would appear, however, that the German version of subsidiarity is not as wide as that prevailing in Quebec. The reason is that a generalized weak subsidiarity must make unjustified enrichment claims unavailable where there is a claim based on a wrong. If, as is suggested by the language of art. 1494, this is the law of Quebec, then it would be another reason for disallowing an enrichment claim in the case of the stolen horse under Quebec law.82 But in German law, unjustified enrichment is not subsidiary to the law of wrongs.83 Nor has it been suggested, to my knowledge, that there is any such subsidiarity in the common law. So in these systems, a narrower principle applies.A final point can usefully be addressed before attempting to understand the reasons for subsidiarity. It relates to prescription. Assume that an unjustified enrichment claim is subsidiary to another claim; make it a claim for breach of contract, where the contract has not been terminated by the breach. Now assume that the contractual claim is prescribed by the passage of time. Does it still preclude the enrichment claim? The principle in all systems appears to be that it does.84 This might be thought to indicate a relationship of strong subsidiarity, since the claim in unjustified enrichment is denied even though the other is unavailable. Conversely it might be thought to be inconsistent with a relationship of weak subsidiarity; that only operates when there is another viable claim. It does, however, seem possible to reach this result even if the relationship is one of weak subsidiarity. This involves treating the case of a prescribed claim in the same way as a viable claim, rather than treating it like the situation where the substantive elements of the claim cannot be established.85 It appears therefore that conclusions about the nature of the subsidiarity relationship cannot be drawn from the treatment of prescribed claims.
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