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BCL Law Notes Restitution of Unjust Enrichment Notes

Absence Of Basis Essay

Updated Absence Of Basis Essay Notes

Restitution of Unjust Enrichment Notes

Restitution of Unjust Enrichment

Approximately 91 pages

A comprehensive guide to some of the key topics in the Restitution of Unjust Enrichment module taught on the BCL (but would also be useful for other similar courses).

It includes case summaries, various academic positions and a thorough analysis of some of the key debates within the topic in an easy digestible manner.

It focuses on contributions to this area of law from Andrew Burrows, Graham Virgo and Peter Birks, amongst others. ...

The following is a more accessible plain text extract of the PDF sample above, taken from our Restitution of Unjust Enrichment Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

ABSENCE OF BASIS ESSAY

OPENING

  1. Where D has received an enrichment at the expense of C, this alone is not enough to trigger a restitutionary response. There must also be a triggering event, (and for D to have no defences per Lord Steyn in Battersea). This essay will argue that in England and Wales, that triggering event is that there is an unjust factor (eg. it is unjust for D to retain the benefit as it was transferred as a result of mistake, or under duress or undue influence). However, in civil law systems they operate on an absence of basis approach, whereby, restitution will be effected where there was no grounds for D to retain the benefit. This essay will consider, has English law moved to absence of basis, as Birks says (answer = no) and if not, should it (answer = no)?

WHAT IS THE CURRENT LAW?

  1. LAW CURRENTLY IS ABSENCE OF BASIS

  1. Westdeutsche v Islington – Hobhouse J at first instance and majority of HL (obiter dicta) saw rest as being triggered by voidness of swap contract meaning there was an absence, or automatic failure, of consideration

  2. Guinness Mahon v Kensington – same view as above

  3. Peter Birks said in 2005 that as a result of these swaps cases English law had already ‘in the most unequivocal manner’ moved from unjust factors to absence of basis ALSO

  1. LAW IS NOT ABSENCE OF BASIS

  1. Burrows – in cases above, judges did not mention that they were switching to absence of basis. Rather, they saw ‘absence of consideration’ as an unjust factor

  2. Test Claimants – Lord Sumption said Westdeutsche hasn’t subsequently been understood as providing authority for absence of basis approach and if so the decisions would look rather different

  3. Kleinwort Benson v Lincoln CC – Lord Hope explicitly contrasted common law and civilian approaches

  4. DMG v IRC – Lord Walker said that absence of basis represented a ‘distinct departure from established doctrine’

  1. LAW IS BECOMING MORE ENTRENCHED AS UNJUST FACTORS

  1. Sanders - In 2006, Lord Walker in DMG seemed open to English law developing in accordance with Birks’ scheme. However, by 2012 with Test Claimants, when Mr Rabinowitz QC brought up the point he did not even comment on it

  2. Burrows – lower courts are applying unjust factor scheme ie. Rowe v Vale and Greater Manchester v Wigan Athletic

PROFESSOR STEVENS’ ARGUMENT

  1. Professor Stevens – restitution is not allowed where there is an existing contract that is not avoided or terminated, which can only be explained by absence of basis approach being at the heart of the English system. So whenever D has a legal entitlement to the enrichment (ie. there is a presence of basis) C can’t have restitution BUT

  2. Whilst this is in line with general rule (per Lord Hope in Kleinwort Benson v Lincoln CC), there are exceptions to this rule, as highlighted by Burrows (ie. DMG v IRC) where the Revenue did have a legal entitlement to the tax in one sense, which suggest Professor Stevens is WRONG

WESTDEUTSCHE v ISLINGTON FACTS (brief)

  1. This dealt with payments made under interest-rate swap contracts between banks and local authorities that were held to be void as ultra vires the local authorities

  2. Burrows – correct approach should have been:

  1. money paid under open swaps (swaps that were not fully executed) = failure of consideration or mistake of law

  2. money paid under closed swaps (fully executed) = mistake of law

  1. INSTEAD Hobhouse J at first instance and majority of HoL (as obiter dicta) saw restitution being triggered because the contract was void so that there was an absence, or automatic failure, of consideration

  2. Same reasoning applied by CA in Guiness Mahon v Kensington

WHAT IS BIRKSIAN SCHEME

  1. HOW DOES IT WORK?

  1. Unjust question is answered by reference to one question alone: was there an absence of basis?

  2. Birks –An enrichment which turns out to have no such explanation was inexplicable and could not be retained’

  3. Sanders – has highlighted how the meaning of a legal basis has caused difficulty amongst German academics, especially outside the realm of enforceable obligations.

  1. THERE ISN’T JUST ONE ABSENCE OF BASIS APPROACH

  1. Each civil law country which embraces this approach has their own idiosyncrasies HOWEVER

  2. Birks’ scheme is closest to German approach

  3. Burrows - Birks’ scheme is a good ‘general guide’ for whether English law should embrace this civilian approach as it will already be adapted to ‘fit’ English law and previous decisions

WOULD ABSENCE OF BASIS PRODUCE DIFFERENT RESULTS?

  1. Burrows – he looks at the Birksian scheme and shows that where it’s applied to English unjust enrichment cases it generally gets the same results, although sometimes by different reasoning HOWEVER

  2. CTN Cash and Carry –

  • Money had been demanded that wasn’t due as the person demanding thought it was. C paid the money, knowing it wasn’t due and then claimed it back on the grounds of duress. Restitution did not lie, because there was no duress. But under Birksian scheme, there was no absence of basis so different result would have been achieved according to Burrows

  • Sanders – she says she’s not sure what the result would have been with this case under German law

  • ME: Birks never actually addressed this and had he, I suspect he would say that it was a gift, as C knew the payment wasn’t due. So they took the risk. This highlights the problem with Birks’ scheme, the gift idea is too broad

PROBLEMS WITH BIRKSIAN SCHEME

  1. GIFTS

  1. Burrows – Birksian scheme relies on a problematically wide use of the notion of gift, extreme example of Birks’ treatment of by-benefits

  2. Peter Watts – ‘Surely there is a gift here only because the law has already determined that there should be no claim’

  3. Sanders – critical of Birks’ definition of gifts which included...

Buy the full version of these notes or essay plans and more in our Restitution of Unjust Enrichment Notes.