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Absence Of Basis Essay

BCL Law Notes > Restitution of Unjust Enrichment Notes

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ABSENCE OF BASIS ESSAY

OPENING a) 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?
a) LAW CURRENTLY IS ABSENCE OF BASIS I. 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 II. III.

consideration Guinness Mahon v Kensington - same view as above 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 b) LAW IS NOT ABSENCE OF BASIS I. 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

1 II.

Test Claimants - Lord Sumption said Westdeutsche hasn't subsequently been understood as providing authority for absence of

III. basis approach and if so the decisions would look rather different Kleinwort Benson v Lincoln CC - Lord Hope explicitly contrasted

IV. common law and civilian approaches DMG v IRC - Lord Walker said that absence of basis represented a

'distinct departure from established doctrine' c) LAW IS BECOMING MORE ENTRENCHED AS UNJUST FACTORS I. 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 II.

not even comment on it 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)

2

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