============================================================= ============ Date: Mon, 3 Mar 2003 16:41:30 +0000 Reply-To: Charles Mitchell Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Charles Mitchell Mime-Version: 1.0 Content-Type: multipart/alternative; boundary="=====================_447906==_.ALT" --=====================_447906==_.ALT Content-Type: text/plain; charset="us-ascii"; format=flowed Tomorrow, i.e. Tuesday 4 March, at 6.00pm, the Rt Hon Lord Hope of Craighead will deliver a Public Lecture at King's College London, in the New Lecture Theatre (Room 2B 18) on the Strand Campus. The title of his lecture will be '"'Decision Overruled' - Facing Up to Judicial Fallibility". I do not know whether he plans to say anything about Kleinwort Benson v Lincoln CC. All are welcome to attend. Charles --=====================_447906==_.ALT Content-Type: text/html; charset="us-ascii" Tomorrow, i.e. Tuesday 4 March, at 6.00pm, the Rt Hon Lord Hope of Craighead will deliver a Public Lecture at King's College London, in the New Lecture Theatre (Room 2B 18) on the Strand Campus. The title of his lecture will be '"'Decision Overruled' - Facing Up to Judicial Fallibility". I do not know whether he plans to say anything about Kleinwort Benson v Lincoln CC. All are welcome to attend.

Charles
--=====================_447906==_.ALT-- ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 13 Mar 2003 11:03:35 +0000 Reply-To: Charles Mitchell Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Charles Mitchell Mime-Version: 1.0 Content-Type: multipart/alternative; boundary="=====================_7043828==_.ALT" --=====================_7043828==_.ALT Content-Type: text/plain; charset="us-ascii"; format=flowed List members may be interested to read Papamichael v National Westminster Bank plc [2003] EWHC 164 (Comm). The claimant won 2 billion drachmas in the Greek national lottery. The money was placed in the joint bank account she shared with her husband. Her husband then transferred the money to an account with the defendant bank and lost the lot in a series of foreign exchange dealings. The evidence going to the question whether the husband did this with the claimant's knowledge and consent was murky, but in the end Judge Chambers QC sitting as a deputy High Ct judge concluded that the claimant had not authorised or knowingly consented to her husband's actions. He also found that the employee of the defendant bank who opened the forex trading account for the husband had had constructive knowledge of the fact that the money belonged to the claimant and had been taken without her consent the judge made this finding on the basis that the employee turned a blind eye to facts which would have led a reasonable and honest person to ask who the money belonged to. It followed from this that the bank was not a bona fide purchaser of the money, and so could not rely on bona fide purchase as a defence to the claimant's various claims. These were: (i) a common law claim to recover the money as money had and received; (ii) an equitable claim that the bank had held the money on constructive trust because it had received it with (constructive) knowledge of the fact that it was paid in circumstances entitling the claimant to a restitutionary remedy; (iii) an equitable claim in knowing receipt, founded on the assertion that the husband had breached the fiduciary duty he owed the claimant when he improperly transferred the money to the account. The claimant also threw in a claim for dishonest assistance in the husband's breach of fiduciary duty, which seems to have got slightly lost in amongst all the other claims. Judge Chambers QC found in the claimant's favour under all these heads. Two things strike me about this decision. First, I believe that Jonathon Moore is right to argue that banks in situations of the kind in which the defendant bank found itself in this case should have a defence to restitutionary claims to recover money paid to them by breaching fiduciaries. This would be that they have acted in a ministerial capacity and so have never received the money beneficially for themselves - at the moment of receipt they come under an obligation to account for it to the wrongdoing fiduciary (the husband in this case). It is a great pity that Jonathon has not published his doctoral thesis in which he works through the cases on this point, but I attempt a brief summary of his arguments in my essay in Birks and Pretto Breach of Trust. The defendant bank did not take this point in the case, but in my view it should have been a good one. Secondly, because this defence was not pleaded and so the restitutionary claims appeared to the judge to be good ones, he spent little time examining the dishonest assistance claim, but had he done so, then perhaps the exact state of mind of the bank's employee who opened the account would have assumed much greater significance, since as we now know following Twinsectra it is not enough to show that an assistant did something dishonest, but must also be shown that he knew that his actions were dishonest, something that does not appear to have been tested by the judge. Charles --=====================_7043828==_.ALT Content-Type: text/html; charset="us-ascii" List members may be interested to read Papamichael v National Westminster Bank plc [2003] EWHC 164 (Comm). The claimant won 2 billion drachmas in the Greek national lottery. The money was placed in the joint bank account she shared with her husband. Her husband then transferred the money to an account with the defendant bank and lost the lot in a series of foreign exchange dealings.

The evidence going to the question whether the husband did this with the claimant's knowledge and consent was murky, but in the end Judge Chambers QC sitting as a deputy High Ct judge concluded that the claimant had not authorised or knowingly consented to her husband's actions.

He also found that the employee of the defendant bank who opened the forex trading account for the husband had had constructive knowledge of the fact that the money belonged to the claimant and had been taken without her consent the judge made this finding on the basis that the employee turned a blind eye to facts which would have led a reasonable and honest person to ask who the money belonged to. It followed from this that the bank was not a bona fide purchaser of the money, and so could not rely on bona fide purchase as a defence to the claimant's various claims.

These were: (i) a common law claim to recover the money as money had and received; (ii) an equitable claim that the bank had held the money on constructive trust because it had received it with (constructive) knowledge of the fact that it was paid in circumstances entitling the claimant to a restitutionary remedy; (iii) an equitable claim in knowing receipt, founded on the assertion that the husband had breached the fiduciary duty he owed the claimant when he improperly transferred the money to the account. The claimant also threw in a claim for dishonest assistance in the husband's breach of fiduciary duty, which seems to have got slightly lost in amongst all the other claims. Judge Chambers QC found in the claimant's favour under all these heads.

Two things strike me about this decision. First, I believe that Jonathon Moore is right to argue that banks in situations of the kind in which the defendant bank found itself in this case should have a defence to restitutionary claims to recover money paid to them by breaching fiduciaries. This would be that they have acted in a ministerial capacity and so have never received the money beneficially for themselves - at the moment of receipt they come under an obligation to account for it to the wrongdoing fiduciary (the husband in this case). It is a great pity that Jonathon has not published his doctoral thesis in which he works through the cases on this point, but I attempt a brief summary of his arguments in my essay in Birks and Pretto Breach of Trust. The defendant bank did not take this point in the case, but in my view it should have been a good one.

Secondly, because this defence was not pleaded and so the restitutionary claims appeared to the judge to be good ones, he spent little time examining the dishonest assistance claim, but had he done so, then perhaps the exact state of mind of the bank's employee who opened the account would have assumed much greater significance, since as we now know following Twinsectra it is not enough to show that an assistant did something dishonest, but must also be shown that he knew that his actions were dishonest, something that does not appear to have been tested by the judge.

Charles --=====================_7043828==_.ALT-- ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Fri, 14 Mar 2003 10:35:35 +0000 Reply-To: Charles Mitchell Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Charles Mitchell Subject: Natwest v Papamichael Mime-Version: 1.0 Content-Type: multipart/alternative; boundary="=====================_2784656==_.ALT" --=====================_2784656==_.ALT Content-Type: text/plain; charset="us-ascii"; format=flowed Jonathon Moore has written to remind me that on his approach a bank can rely on the defence of ministerial receipt where a third party pays money to the bank for the benefit of an account-holder, but a bank cannot rely on the defence where it has been paid money by an account-holder for his own account, as in these circumstances the bank takes beneficially. In Papamichael, the husband opened the forex margin trading account in his own name, and then arranged for funds to be transferred via EFT from the joint account (which was operated by another bank) to the forex account. The husband was legally entitled to do this as a joint account holder, albeit that his actions were inconsistent with his wife's equitable rights, and the judge held that he could not be said to have acted with actual or apparent authority of his wife when he arranged for the transfer. As I understand him, Jonathon would therefore say that the bank must have taken beneficially, with the result that no defence of ministerial receipt would be available. On another point, I was not quite accurate when I said that the judge did not appear to have tested whether the bank's employee had acted with conscious dishonesty, since he held at para 251 that: By the application of the double test contained in the above passage [from Lord Hutton's speech in Twinsectra] Mr Makris was dishonest with the consequence that the bank must also be so held. What I meant to say, more exactly, was that although the judge purported to apply the Twinsectra test, it is unclear which facts led him to the conclusion that the bank's employee had been conscious of his own dishonesty. The judge does not point to any particular statement by the employee as proof that the employee had consciously considered the propriety of his actions, realized that he was acting improperly, and decided to press on regardless. The impression is therefore created that the judge thought that the employee 'must have known' because the dishonesty of his behaviour would - or even should - have been obvious to anyone in his position. If this was the judge's approach then it seems to me to water down the Twinsectra test quite considerably. Charles --=====================_2784656==_.ALT Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Jonathon Moore has written to remind me that on his approach a bank can rely on the defence of ministerial receipt where a third party pays money to the bank for the benefit of an account-holder, but a bank cannot rely on the defence where it has been paid money by an account-holder for his own account, as in these circumstances the bank takes beneficially. In Papamichael, the husband opened the forex margin trading account in his own name, and then arranged for funds to be transferred via EFT from the joint account (which was operated by another bank) to the forex account. The husband was legally entitled to do this as a joint account holder, albeit that his actions were inconsistent with his wife's equitable rights, and the judge held that he could not be said to have acted with actual or apparent authority of his wife when he arranged for the transfer. As I understand him, Jonathon would therefore say that the bank must have taken beneficially, with the result that no defence of ministerial receipt would be available.

On another point, I was not quite accurate when I said that the judge did not appear to have tested whether the bank's employee had acted with conscious dishonesty, since he held at para 251 that:

By the application of the double test contained in the above passage [from Lord Hutton's speech in Twinsectra] Mr Makris was dishonest with the consequence that the bank must also be so held.

What I meant to say, more exactly, was that although the judge purported to apply the Twinsectra test, it is unclear which facts led him to the conclusion that the bank's employee had been conscious of his own dishonesty. The judge does not point to any particular statement by the employee as proof that the employee had consciously considered the propriety of his actions, realized that he was acting improperly, and decided to press on regardless. The impression is therefore created that the judge thought that the employee 'must have known' because the dishonesty of his behaviour would - or even should - have been obvious to anyone in his position. If this was the judge's approach then it seems to me to water down the Twinsectra test quite considerably.

Charles --=====================_2784656==_.ALT-- ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Tue, 18 Mar 2003 16:38:37 -0500 Reply-To: jneyers@uwo.ca Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Jason Neyers Organization: University of Western Ontario Subject: New PC Decision Comments: To: obligations@uwo.ca MIME-Version: 1.0 Content-Type: multipart/alternative; boundary="------------6B50A7F9AAB20BFA31FD0752" --------------6B50A7F9AAB20BFA31FD0752 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Dear Colleagues, The Pricy Council has released a new decision dealing with issues of Undue Influence, Duress and Consideration (see "http://www.privy-council.org.uk/files/other/r%20v.rtf%20paras.rtf"). The context for the discussion of these issues was a non-disclosure contract entered into by a SAS officer with the Ministry of Defence. Personally, I have doubts as to whether the conclusion of the board on the consideration issue is correct. But beyond that, the decision is notable for Lord Scott's dissent on the issue of undue influence and for Lord Hoffmann's accessible explanation of Royal Bank of Scotland plc v Etridge (No. 2) and of duress for the majority. Anyone looking for a good contract exam question would be well advised to have a look. Sincerely, -- Jason Neyers Assistant Professor of Law Faculty of Law University of Western Ontario N6A 3K7 (519) 661-2111 x. 88435 --------------6B50A7F9AAB20BFA31FD0752 Content-Type: text/html; charset=us-ascii Content-Transfer-Encoding: 7bit Dear Colleagues,

The Pricy Council has released a new decision dealing with issues of Undue Influence, Duress and Consideration (see "http://www.privy- council.org.uk/files/other/r%20v.rtf%20paras.rtf"). The context for the discussion of these issues was a non-disclosure contract entered into by a SAS officer with the Ministry of Defence. Personally, I have doubts as to whether the conclusion of the board on the consideration issue is correct. But beyond that, the decision is notable for Lord Scott's dissent on the issue of undue influence and for Lord Hoffmann's accessible explanation of Royal Bank of Scotland plc v Etridge (No. 2) and of duress for the majority.

Anyone looking for a good contract exam question would be well advised to have a look.

Sincerely,

--
Jason Neyers
Assistant Professor of Law
Faculty of Law
University of Western Ontario
N6A 3K7
(519) 661-2111 x. 88435
--------------6B50A7F9AAB20BFA31FD0752-- ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Mon, 24 Mar 2003 09:58:53 +0000 Reply-To: =?iso-8859-1?q?Christopher=20Kirkbride?= Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: =?iso-8859-1?q?Christopher=20Kirkbride?= Subject: New case, very little info at the moment MIME-Version: 1.0 Content-Type: multipart/alternative; boundary="0-825838841-1048499933=:1425" Content-Transfer-Encoding: 8bit --0-825838841-1048499933=:1425 Content-Type: text/plain; charset=iso-8859-1 Content-Transfer-Encoding: 8bit Dear All, On Thursday (20/03/03), CA delivered judgment in Experience Hendrix LLC v PPX Enterprises Inc and another (CA) (Peter Gibson, Mance LJJ and Hooper J) holding that deliberate breaches of contract occurred frequently in the commercial world, but something more was needed to make the circumstances exceptional enough to justify ordering an account of profits, particularly when an alternative remedy was available. This brief note was provided by a legal updater. The judgment is not yet on the Court Service website, nor is it available on the many subscription services. I understand that the Liverpool Daily Post and Echo did carry the story - Perhaps a link should be added to Steve Hedley's Enrichment Internet Resource! We await the full text with bated breath. Kind Regards, Chris. --------------------------------- With Yahoo! Mail you can get a bigger mailbox -- choose a size that fits your needs --0-825838841-1048499933=:1425 Content-Type: text/html; charset=iso-8859-1 Content-Transfer-Encoding: 8bit

Dear All,

On Thursday (20/03/03), CA delivered judgment in Experience Hendrix LLC v PPX Enterprises Inc and another (CA) (Peter Gibson, Mance LJJ and Hooper J) holding that deliberate breaches of contract occurred frequently in the commercial world, but something more was needed to make the circumstances exceptional enough to justify ordering an account of profits, particularly when an alternative remedy was available.

This brief note was provided by a legal updater. The judgment is not yet on the Court Service website, nor is it available on the many subscription services. I understand that the Liverpool Daily Post and Echo did carry the story - Perhaps a link should be added to Steve Hedley's Enrichment Internet Resource! We await the full text with bated breath.

Kind Regards,

Chris.

With Yahoo! Mail you can get a bigger mailbox -- choose a size that fits your needs
--0-825838841-1048499933=:1425-- ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Mon, 24 Mar 2003 11:09:02 +0000 Reply-To: Andrew Burrows Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Andrew Burrows Organization: St Hughs College Subject: New Case MIME-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Dear all, The new case referred to by Christopher Kirkbride, Experience Hendrix LLC v PPX Enterprises Inc is at [2003] EWCA 323. The main question at issue was what monetary remedy was the claimant company (constituting the estate of Jimi Hendrix) entitled to for breach of a 1973 settlement agreement with a record company (PPX). The breach of the settlement agreement contituted the use by PPX of certain master tapes. The CA held that an award of damages comprising a reasonable sum for use of that material (based on a proportion of the advances and royalties received by PPX) should be awarded but that a full account of all profits made from the breach should not be ordered. Wrotham Park Estates was therefore applied and AttGen V Blake was distinguished. The CA accepted that it was not awarding damages to compensate for any financial loss to the claimant: indeed counsel for the claimant accepted that he could not offer any evidence as to there being any loss. It seems to me that the reasoning shows that there is a sliding scale of gain-based damages through from awarding a proportion of the profits made (as here) to a full account of all profits made. Careful justifications were given by Mance LJ for why, in contrast to Blake, a full account of all profits was not here appropriate (eg in contrast to Blake there was no relationship between the parties that came close to being fiduciary). ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Mon, 24 Mar 2003 11:31:12 +0000 Reply-To: Steve Hedley Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Steve Hedley Subject: New case, very little info at the moment In-Reply-To: <20030324095853.3000.qmail@web21507.mail.yahoo.com> Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Done. At 09:58 24/03/03 +0000, Christopher Kirkbride wrote: Perhaps a link should be added to Steve Hedley's Enrichment Internet Resource! We await the full text with bated breath. Steve Hedley ============================================= FACULTY OF LAW, UNIVERSITY OF CAMBRIDGE e-mail : steve.hedley@law.cam.ac.uk ansaphone : +44 1223 334931 www.stevehedley.com fax : +44 1223 334967 Christ's College Cambridge CB2 3BU ============================================= ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Mon, 24 Mar 2003 13:19:10 -0000 Reply-To: Simon Macdonald Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Simon Macdonald Subject: Re: New Case MIME-Version: 1.0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable I am very interested by this sliding scale of gain-based damages, and = the rationale therefor. Based solely on Andrew Burrows' summary, it = looks to me that the CA are trying to compensate the claimant for some = fictional loss (the "reasonable sum for the use of that material" would = logically equate to some licence fee which the claimant could reasonably = have expected to be paid for the use of the master tapes) by partially = reversing the unjust enrichment of the defendant. This would seem to = muddy the water. The defendant's breach of contract (unjust factor) = produced profits (enrichment). Why should only some of this enrichment = be reversed? The CA accepts that there is no loss, but a partial = reversal of the enrichment must, it seems to me, be designed to provide = the claimant with what the CA considers to be appropriate compensation, = rather than to reward the wrongdoing defendant for its endeavours. Is = the CA therefore providing a restitutionary remedy to compensate the = claimant for what they calculate would have been his expectation = interest had circumstances been different? =20 As to the distinction drawn between this case and Blake based on the = relationship between the parties, this seems weak - it was surely the = contractual rather than any fiduciary duty between Blake and his = employer which rendered his enrichment unjust and required an account = thereof? The distinction arguably adds a new tier to the unjust factor = requirement, unless the suggestion is that for the wrongdoer, not having = quasi-fiduciary obligations provides a defence to a claim for = restitution. There seem to be two results of all of this: 1. depending on the nature = of fiduciary relations, a party may breach a contract safe in the = knowledge that they will be entitled to keep the resulting profits, bar = the proportion of which that the other party might have expected under = some fictional contract permitting the breach. 2. it will be difficult = to advise on quantum in relation to such a breach, as judges will have = to be hypothetical rather than simply looking to profits made. I look forward to learning that I have fundamentally misunderstood the = issues! Simon MacDonald -----Original Message----- From: Andrew Burrows [mailto:andrew.burrows@LAW.OXFORD.AC.UK]=20 Sent: 24 March 2003 11:09 To: ENRICHMENT@LISTS.MCGILL.CA Subject: [RDG:] New Case Dear all, The new case referred to by Christopher Kirkbride, Experience Hendrix LLC v PPX Enterprises Inc is at [2003] EWCA 323. The main question at issue was what monetary remedy was the claimant company (constituting the estate of Jimi Hendrix) entitled to for breach of a 1973 settlement agreement with a record company (PPX). The breach of the settlement agreement contituted the use by PPX of certain master tapes. The CA held that an award of damages comprising a reasonable sum for use of that material (based on a proportion of the advances and royalties received by PPX) should be awarded but that a full account of all profits made from the breach should not be ordered. Wrotham Park Estates was therefore applied and AttGen V Blake was distinguished. The CA accepted that it was not awarding damages to compensate for any financial loss to the claimant: indeed counsel for the claimant accepted that he could not offer any evidence as to there being any loss. It seems to me that the reasoning shows that there is a sliding scale of gain-based damages through from awarding a proportion of the profits made (as here) to a full account of all profits made. Careful justifications were given by Mance LJ for why, in contrast to Blake, a full account of all profits was not here appropriate (eg in contrast to Blake there was no relationship between the parties that came close to being fiduciary). ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Mon, 24 Mar 2003 15:05:58 +0000 Reply-To: Steve Hedley Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Steve Hedley Subject: Experience Hendrix v. PPX Enterprises (CA) In-Reply-To: <3E7EE74E.340D9F6F@law.ox.ac.uk> Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" At 11:09 24/03/03, Andrew Burrows wrote: >The CA accepted that it was not awarding damages >to compensate for any financial loss to the claimant: >indeed counsel for the claimant accepted that he >could not offer any evidence as to there being any >loss. It is intriguing how impoverished a concept of 'loss' is being employed here. Take a parallel case within obligations: Say the defendant negligently destroys the claimant's valuable painting; yet it is shown that the claimant was deeply attached to the painting, and would never have sold it at any price. On the narrow concept of 'loss' used here, no financial loss can be established. But of course, that would not stop the court awarding the painting's reasonable value. Or again, take personal injury damages. If the defendant injures me so as to stop me from working, I am entitled to my lost earnings. It may be that my employment prospects were uncertain; it is also very probably the case that I would never have sold to the defendant the right to injure me, at any price. But again, there is no doubt that a loss has occurred, and so the court must somehow quantify that loss in financial terms. You do not defeat a claim for compensation by saying that the claimant would never voluntarily have sold what the defendant took. Money being all the court has to give, then everything must be reduced to money, whatever the artificiality. So equally here. The defendants exploited certain recordings, in breach of the claimant's contractual rights in the matter. Those facts demand compensation for the claimant's loss. The court awarded the reasonable value of what was taken, just as in the standard tort case. When the claimant said that there was 'no loss', presumably he meant that there was no CONSEQUENTIAL loss, or perhaps that he could not say whether he would ever have exploited the rights himself. But this cannot defeat a claim for the loss suffered, though it undoubtedly complicates the court's task. >It seems to me that the reasoning shows that there is >a sliding scale of gain-based damages through from >awarding a proportion of the profits made (as here) to >a full account of all profits made. The court said nothing about a sliding scale. I would therefore be interested to know what Andrew is referring to. It seems to me that 'gain' means whatever its proponents want it to mean; what Andrew thinks of as a 'sliding scale' is simply doctrinal incoherence. As a matter of fact, the court made no enquiry into the amount of profits made (see para 14). So if Andrew claims that that the sum awarded was 'a proportion of the profits made', I reply, 'How does he know?'. In fact, the court did not say precisely how the sum was to be calculated, but it was evidently NOT simply a matter of calculating the profit made, and then calculating a certain proportion of that sum. Rather, it was a question of ascertaining what bargain would probably have been struck, had the claimant been willing to sell the rights and the defendant willing to buy (see paras 45-46). So what the court did was to impose on the defendants an obligation to pay a reasonable price for what they took. Or to put the same thing another way - What the defendants should have done was to BUY the rights from the claimant - and so the court treats the defendants as if they had made the bargain which they ought to have made. I believe that this is known as a 'quasi-contract'. [FX: Clanking of medieval chains, creeping closer and closer.] >Careful justifications were given by Mance LJ for why, >in contrast to Blake, a full account of all profits was not >here appropriate (eg in contrast to Blake there was no >relationship between the parties that came close to >being fiduciary). Fortunately, Mance LJ stressed that an award under Blake will be very much the exception; and he stressed that Blake concerned the security services, a unique institution (see paras 29 and 37). As some commentators mentioned at the time, the Blake opinions read as the imposition of a special law, crafted to punish one person whom the court regarded (rightly or wrongly) as uniquely bad. Whether such special laws have any place in modern society is, of course, a matter on which different views are held. My own is that common law forfeiture of the assets of convicted felons rightly fell into disuse some centuries ago. While I am in two minds whether parliament is right in its recent re-introduction of a forfeiture remedy, it is certainly not for the courts to develop one of their own. I am also a little suprised that those who say they oppose 'discretionary remedialism' do not recognise an example of it when it stares them in the face. Naming no names, of course. Steve Hedley ============================================= FACULTY OF LAW, UNIVERSITY OF CAMBRIDGE e-mail : steve.hedley@law.cam.ac.uk ansaphone : +44 1223 334931 www.stevehedley.com fax : +44 1223 334967 Christ's College Cambridge CB2 3BU ============================================= ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Mon, 24 Mar 2003 15:15:40 +0000 Reply-To: James Edelman Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: James Edelman Subject: New Case Mime-Version: 1.0 Content-Type: text/plain; format=flowed Dear all, I think the key to understanding Experience Hendrix LLC is in paragraph 26 of Mance LJ's judgment. Mance LJ makes it clear that this "reasonable payment for use value" is an objective measure. Although the actual profits made might be used to determine this objective value transferred, the fact that the defendant made profits is actually irrelevant to the *availability* of this measure. Mance LJ makes this clear when he says that the "reasonable payment" is still available even if NO profit is made (a tort case like Inverugie v Hackett might be a good example of this). Understood in this way it is impossible to see gain-based damages as a sliding scale of proportions of profit. It must be seen as a wholly separate measure from an award disgorging profits. Here is what Mance LJ said: "In a case such as Wrotham Park the law gives effect to the instinctive reaction that, whether or not the appellant would have been better off if the wrong had not been committed, the wrongdoer ought not to gain an advantage for free, and should make some reasonable recompense. In such a context it is natural to pay regard to any profit made by the wrongdoer (although a wrongdoer surely cannot always rely on avoiding having to make reasonable recompense by showing that despite his wrong he failed, perhaps simply due to his own incompetence, to make any profit)." Jamie _________________________________________________________________ Hotmail now available on Australian mobile phones. Go to http://ninemsn.com.au/mobilecentral/hotmail_mobile.asp ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Mon, 24 Mar 2003 16:39:38 +0000 Reply-To: Charles Mitchell Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Charles Mitchell Subject: Hendrix Mime-Version: 1.0 Content-Type: multipart/alternative; boundary="=====================_5181296==_.ALT" --=====================_5181296==_.ALT Content-Type: text/plain; charset="us-ascii"; format=flowed Discussing the Hendrix case in my Restitution class today, we got on to the subject of why it might matter in practical terms whether an award of the amount which an innocent party C would have charged a wrongdoer D for the right to do what D wrongfully did is compensatory or restitutionary. We decided that C of P would probably not be available to D either way because he is a wrongdoer (sed quaere what did Lord Goff mean by 'wrongdoer' in Lipkin Gorman?). One of my students then suggested that D might argue subjective devaluation in response to a claim for a gain-based award, but could not argue this in response to a claim for a loss-based award. This then took us to Andrew Burrows' idea that where D has 'reprehensibly sought out' a benefit he should not be allowed to argue that he did not subjectively value it at its market rate - but this in turn then led us to the thought that this idea is not borne out by Ministry of Defence v Ashman where Mrs A deliberately trespassed on the MOD's property (having nowhere else to go), but was allowed to make a subjective devaluation argument nonetheless. We haven't heard from Jamie Edelman yet, but perhaps he might wish to argue that Hendrix does not bear out Andrew's 'sliding scale' analysis or Steve's 'discretionary remedialism' analysis, but instead vindicates (FX: clank, clank) his view that there are two types of gain-based remedy for wrongdoing, viz restitutionary damages and disgorgement damages, that Blake is an example of the latter, and that Hendrix is an example of the former. Over to you, Jamie ... Charles P.S. None of my students would admit to listening to Jimi themselves, although several 'know someone who does'. --=====================_5181296==_.ALT Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Discussing the Hendrix case in my Restitution class today, we got on to the subject of why it might matter in practical terms whether an award of the amount which an innocent party C would have charged a wrongdoer D for the right to do what D wrongfully did is compensatory or restitutionary. We decided that C of P would probably not be available to D either way because he is a wrongdoer (sed quaere what did Lord Goff mean by 'wrongdoer' in Lipkin Gorman?). One of my students then suggested that D might argue subjective devaluation in response to a claim for a gain-based award, but could not argue this in response to a claim for a loss-based award. This then took us to Andrew Burrows' idea that where D has 'reprehensibly sought out' a benefit he should not be allowed to argue that he did not subjectively value it at its market rate - but this in turn then led us to the thought that this idea is not borne out by Ministry of Defence v Ashman where Mrs A deliberately trespassed on the MOD's property (having nowhere else to go), but was allowed to make a subjective devaluation argument nonetheless.

We haven't heard from Jamie Edelman yet, but perhaps he might wish to argue that Hendrix does not bear out Andrew's 'sliding scale' analysis or Steve's 'discretionary remedialism' analysis, but instead vindicates (FX: clank, clank) his view that there are two types of gain-based remedy for wrongdoing, viz restitutionary damages and disgorgement damages, that Blake is an example of the latter, and that Hendrix is an example of the former. Over to you, Jamie ...

Charles

P.S. None of my students would admit to listening to Jimi themselves, although several 'know someone who does'. --=====================_5181296==_.ALT-- ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Tue, 25 Mar 2003 09:22:38 -0500 Reply-To: Hanoch Dagan Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Hanoch Dagan Subject: Re: Hendrix In-Reply-To: <3E7EE74E.340D9F6F@law.ox.ac.uk> Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii"; format=flowed Dear all, I find the Hendrix case interesting and important because it seems to me to open a promising path in the ongoing debate over restitutionary damages for breach of contract (I apologize for using this term, which I know may be out of favor by some). As I read the opinion of Mance LJ in Hendrix, it stands for two convincing propositions: 1. An actual profits measure of recovery (Blake) should be available only in exceptional circumstances. More particularly -- and I know that this one is controversial -- I read Hendrix in this respect very much like Andrew does, namely: that the Blake rule applies where "the relationship between the parties came close to being fiduciary." In any event, Hendrix clearly rejects an Adras approach in which full, actual net profits are available for a deliberate breach even in a purely commercial setting. For reasons that I've discussed elsewhere ( 98 Michigan L. Rev. 138 and 1 Theoretical Inquiries in Law 115 respectively) I support both prongs of this proposition. 2. On the other hand, as Jamie indicated, the prescribed remedy is "a wholly separate measure from an award of disgorging profits," because it is an objective measure: the "reasonable payment for use value." This measure does not effectively deter breaches; indeed, as I've just indicated it stands for the proposition that in commercial settings breaches need not be deterred. In terms of the celebrated Calabresi-Melamed scheme this measure of fair market value is a classic example for a liability rule. More precisely, to use the terminology I developed in my Unjust Enrichment book, the Hendrix rule does not vindicate a promisee's libertarian right in a contract. But -- pace Steve's comments -- the measure of recovery it prescribes does go further than just protecting a promisee against loss (at least under the strict -- but helpful -- meaning of the term "loss"). The Hendrix rule vindicates the promisee's utilitarian right in the performance by allowing recovery of reasonable use value even where, on any fair reading of the circumstances, the breach did not cause the promisee any actual harm. This indeed seems to me an appropriate remedy in a commercial setting where the promisee does the very thing it contracted not to do. Furthermore, if this is the rule of the case, it does not involve any discretionary remedialism: this measure of recovery applies in other restitutionary contexts as well; notably, in the American context, in cases of patent infringements. Hanoch Hanoch Dagan Affiliated Overseas Professor University of Michigan School of Law 625 South State Street Ann Arbor, MI 48109-1215 (734) 647-7352 (o) (734) 764-8309 (fax) hdagan@umich.edu ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Tue, 25 Mar 2003 16:21:59 +0000 Reply-To: Steve Hedley Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Steve Hedley Subject: Hendrix In-Reply-To: <4.3.2.7.2.20030325083905.00ae1420@h.imap.itd.umich.edu> Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" At 09:22 25/03/03 -0500, Hanoch Dagan wrote: >Furthermore, if this is the rule of the case, it does not involve >any discretionary remedialism: this measure of recovery >applies in other restitutionary contexts as well; notably, in >the American context, in cases of patent infringements. My reference to "discretionary remedialism" was a reference to the measure in Blake, which (as appears from both Blake and Hendrix) is discretionary through-and-through. I entirely agree that the Hendrix measure is not discretionary. It is available as a matter of right in a variety of different contexts, in contract and tort and restitution (though of course some empire-builders have claimed that they are all "really" restitutionary). This is precisely why talk of both measures being on the same "sliding scale" is confused and confusing. Chalk is not on a "sliding scale" with cheese. (By the way, what sort of breach of contract does NOT consist of one contractor doing "the very thing s/he contracted not to do"? These words seem to me apt to describe any breach of contract, and I have never understood what special class of case the phrase is meant to indicate.) Steve Hedley ============================================= FACULTY OF LAW, UNIVERSITY OF CAMBRIDGE e-mail : steve.hedley@law.cam.ac.uk ansaphone : +44 1223 334931 www.stevehedley.com fax : +44 1223 334967 Christ's College Cambridge CB2 3BU ============================================= ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Tue, 25 Mar 2003 17:58:00 +0000 Reply-To: Andrew Burrows Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Andrew Burrows Organization: St Hughs College Subject: Hendrix etc MIME-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Dear all, As regards the disagreement as to whether Wrotham Park Estate and Att-Gen v Blake are based on the same principle and represent a sliding scale of restititution/disgorgement for wrongs, readers may be interested in Lord Nicholls' recent extra-judicial views. At p 129 of Commercial Remedies (ed Burrows and Peel, 2003) which has just been published by Oxford University Press there appears the following (which reports the colloquium discussion of these issues): " Once one had crossed the threshold for being able to recover an account of profits for breach of contract, rather than compensatory damages or specific relief, Lord Nicholls thought that the measure of recovery could extend from expense saved through to stripping a proportion of the profits made through to stripping all of the profits made from the breach. The Wrotham Park Estate case (where 5 per cent of the profits had been stripped) was therefore based on the same principle as A-G v Blake (where all the profits had been stripped)." I presume Lord Nicholls is the "empire-builder" to whom Steve Hedley is referring! Andrew Burrows ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Tue, 25 Mar 2003 19:31:56 +0000 Reply-To: Steve Hedley Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Steve Hedley Subject: Hendrix etc In-Reply-To: <3E8098A8.F8C04863@law.ox.ac.uk> Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" At 17:58 25/03/03 +0000, Andrew Burrows wrote: >At p 129 of Commercial Remedies (ed Burrows and Peel, 2003) >which has just been published by Oxford University Press there >appears the following (which reports the colloquium discussion >of these issues): "Once one had crossed the threshold for being >able to recover an account of profits for breach of contract, rather >than compensatory damages or specific relief, Lord Nicholls >thought that the measure of recovery could extend from expense >saved through to stripping a proportion of the profits made >through to stripping all of the profits made from the breach. The >Wrotham Park Estate case (where 5 per cent of the profits had >been stripped) was therefore based on the same principle as >A-G v Blake (where all the profits had been stripped)." Evidently, then, his lordship was not as well-informed as he could have been. The sum awarded in Wrotham Park was not 5 per cent of the profits made, but 5 per cent of the profits that could reasonably have been anticipated at the time of the defendant's misbehaviour. As Jamie Edelman has already pointed out, it is inaccurate to describe an award of this sort as a profit measure - it bears no relation to any profit actually made, and it may be awarded even if the defendant in fact made a loss. And was the sum removed in Blake really profit? If George Blake managed to write the book without incurring any expenses, he must be unique amongst authors. If he didn't, then presumably the Lords took MORE than 100 per cent of his profit. The passage also neglects Simon Macdonald's point, that application of the "sliding scale" seems to represent a PARTIAL reversal of an unjust enrichment - a theoretical move that surely needs a slightly better justification than has been given. Unless, that is, the purple haze of unjust enrichment theory is to become yet more purple and hazy. To sum up, then, the arguments so far adduced for the "sliding scale" have been:- 1. alleged support in Hendrix (though not in any particular paragraph, apparently), and 2. extra-judicial support from Lord Nicholls (in a passage containing a basic error, which his editors did not correct). Are there are further arguments in its favour, or is this as good as it gets? >I presume Lord Nicholls is the "empire-builder" to whom >Steve Hedley is referring! Actually, no. You can have another guess, if you like. Steve Hedley ============================================= FACULTY OF LAW, UNIVERSITY OF CAMBRIDGE e-mail : steve.hedley@law.cam.ac.uk ansaphone : +44 1223 334931 www.stevehedley.com fax : +44 1223 334967 Christ's College Cambridge CB2 3BU ============================================= ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Wed, 26 Mar 2003 14:26:59 +0000 Reply-To: peter.jaffey@brunel.ac.uk Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Peter Jaffey Subject: Hendrix MIME-Version: 1.0 Content-Type: TEXT/PLAIN; CHARSET=US-ASCII I agree that the Blake full profit measure should be exceptional. As I have suggested before I think it should be available only where the claimant will suffer significant uncompensable harm if the defendant does not perform the contract. This accounts for disclosure of information cases including government secrets and also generally negative obligations, because here generally the claimant cannot get substitute performance from someone else. It also accounts for fiduciary cases, but I would not say that the availability of the full profit measure is dependent on the contract's being "close to fiduciary", because there are cases where this test is satisfied that are clearly not fiduciary because there is no discretion involved. I also agree that the full profit measure should be kept quite distinct from the "reasonable payment" measure. The two are based on quite different principles. A few years ago I used the expressions "disgorgement damages" and "restitutionary damages" to distinguish between them. Disgorgement is based on the principle that a wrongdoer should not profit from a wrong, so the question in contract is when it is really wrongful not to perform a contract, and I think this is where uncompensable harm will result. In the original trespass cases and the IP cases the basis of the "restitutionary damages" claim seems to me to be simply the right of an owner to the "use-value" of the property, by virtue of which he can exact a reasonable payment for use. But this cannot be applied straightforwardly to contract. Possibly it would apply where the very purpose of a contractual restriction was to enable a fee to be subsequently exacted in return for waiving the restriction, giving the claimant a right to some part of the value of the restricted activity. This is the case in some but not all restrictive covenant cases and possibly it could be relevant in Hendrix. Peter. Prof Peter Jaffey Law Department Brunel University Uxbridge Middx UB8 3PH Tel: 01895 274000 Email: peter.jaffey@brunel.ac.uk Web: http://www.brunel.ac.uk/depts/law/index.htm ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Wed, 26 Mar 2003 13:57:50 -0500 Reply-To: Hanoch Dagan Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Hanoch Dagan Subject: Re: Hendrix In-Reply-To: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii"; format=flowed At 02:26 PM 3/26/03 +0000, Peter Jaffey wrote: >I agree that the Blake full profit measure should be exceptional. As I have >suggested before I think it should be available only where the claimant will >suffer significant uncompensable harm if the defendant does not perform the >contract. I have always been suspicious of this rationale for profits-based recovery for breach of contract. I do not deny such a recovery where the profits that the promisor obtained from her breach can help assess the promisee's lost profits (for example, where both parties operate in similar markets and with comparable skills). But in these cases traditional common law grants such an award under the heading of the expectation interest. The difficult cases, which were the focus of our attention in recent years, are ones in which the promisor's profits are not a good (or even reasonable) proxy of the promisee's loss. In such cases -- such as where the promisor sells in a different market or where by the time the promisee covers in the market, the market price equals the contract price -- a profits-based recovery is, I would argue, inappropriate. Because it cannot serve as the second-best to lost profits, looking at the promisor's profits cannot reasonable help us solve the problem of undercompensation. The proper solution for undercompensation in these cases is liquidated damages that allow a promisee to assess (ex ante) the circumstances in which she may be undercompensated due to loss that can be verified ex post only at a prohibitively high cost. Furthermore, not only that difficulties of proof do not provide the rationale for awarding profits-based recovery for uncompensated losses, but in fact I believe that proof difficulties -- this time difficulties in proving the promisor's profits -- generally render such a measure of recovery an undesirable pecuniary remedy. To see why, notice that while traditional contract remedies, aimed at compensating a promisee for her loss, require information that tends to be available to the promisee-plaintiff, the data required for establishing the promisor's profits are much more difficult to produce. Not only that a promisee needs to get information regarding the promisor's affairs; she needs to resolve difficult questions of causation and attribution. Contractual entitlements -- such as the entitlement to the promisor's profits -- that rely on information that can be verified only at a prohibitively high cost are inefficient. More importantly, such entitlements create the very kind of uncertainty that commercial parties dislike. Therefore, in most cases employing a profit-based measure of recovery would undermine the probable intent of most such commercial parties. Such inefficient defaults are not only undesirable from the promisor's point of view, of course. They are also (ex ante) undesirable from the promisee's perspective, at least insofar as commercial parties are concerned, because the cost that the promisor is expected to incur -- and, hence, the additional price she will charge the promisee -- due to such an inefficient sanction for non-performance is, by definition, greater than the expected benefit the promisee is likely to derive from such a remedy. Hanoch Hanoch Dagan Affiliated Overseas Professor University of Michigan School of Law 625 South State Street Ann Arbor, MI 48109-1215 (734) 647-7352 (o) (734) 764-8309 (fax) hdagan@umich.edu ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 01:23:02 +0000 Reply-To: James Edelman Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: James Edelman Subject: Re: Hendrix Mime-Version: 1.0 Content-Type: text/plain; format=flowed Dear all, I certainly agree with Peter that the claim in Hendrix was not one of disgorgement damages. But I do not think that the decision supports the thesis in his stimulating monograph, The Nature and Scope of Restitution, that a "use claim" (restitutionary damages) does not arise from a wrong (here the breach of contract) but is based on an imputed contract between the parties. It seems to me that the Court of Appeal, having rejected the disgorgement damages award (account of profits) for the breach of contract, was quite clearly awarding restitutionary damages (the use claim) for the breach of contract. In relation to the rationale for each, I don't think it is possible to support disgorgement damages as a type of surrogate for compensation. When a court focuses exclusively upon stripping the profits of a defendant the only possible rationale I can see is to deter the defendant, and others, from commission of that wrong. Undoubtedly there will be difficulties in determining how that profit should be measured (for instance, to what extent should allowances for skill and effort be given as expenses incurred, should opportunity costs should be allowed as expenses) but this should not distract from the deterrent focus of this award. Courts have long emphasised that the award of an account of profits (disgorgement damages) for a breach of fiduciary duty is based upon deterrence. Other profit-stripping or disgorgement damages awards should be no different. I also agree that the use-value claim is restitutionary. And where it is given for a wrong, perhaps it should be called "restitutionary damages" (to differentiate it from restitution for unjust enrichment). The basis and rationale for this claim depends upon the cause of action which gives rise to it. Where courts say that these restitutionary awards are given for a wrong (in this case, the breach of contract) I think they should be taken at their word. There is no necessary reason why we should say that what the judges really meant was that the claim was one for an imputed contract or that it should be re-interpreted as a claim in unjust enrichment. The rationale in such cases is simply that there was a wrongful transfer. If it is possible to reverse transfers for other reasons then it must be possible to reverse a transfer where it is recognised that it has been wrongfully made. For a superb explanation of the corrective justice basis of reversal of transfers (although focussing on unjust enrichment) see Lionel Smith's discussion of Weinrib's "The Idea of Private Law" in (2001) Texas Law Rev 2115. Jamie >From: Peter Jaffey >Reply-To: peter.jaffey@brunel.ac.uk >To: ENRICHMENT@LISTS.MCGILL.CA >Subject: [RDG:] Hendrix >Date: Wed, 26 Mar 2003 14:26:59 +0000 > >I agree that the Blake full profit measure should be exceptional. As I have >suggested before I think it should be available only where the claimant >will >suffer significant uncompensable harm if the defendant does not perform the >contract. This accounts for disclosure of information cases including >government secrets and also generally negative obligations, because here >generally the claimant cannot get substitute performance from someone else. >It also accounts for fiduciary cases, but I would not say that the >availability of the full profit measure is dependent on the contract's >being >"close to fiduciary", because there are cases where this test is satisfied >that are clearly not fiduciary because there is no discretion involved. > >I also agree that the full profit measure should be kept quite distinct >from the "reasonable payment" measure. The two are based on quite different >principles. A few years ago I used the expressions "disgorgement damages" >and "restitutionary damages" to distinguish between them. Disgorgement is >based on the principle that a wrongdoer should not profit from a wrong, so >the question in contract is when it is really wrongful not to perform a >contract, and I think this is where uncompensable harm will result. In the >original trespass cases and the IP cases the basis of the "restitutionary >damages" claim seems to me to be simply the right of an owner to the >"use-value" of the property, by virtue of which he can exact a reasonable >payment for use. But this cannot be applied straightforwardly to contract. >Possibly it would apply where the very purpose of a contractual restriction >was to enable a fee to be subsequently exacted in return for waiving the >restriction, giving the claimant a right to some part of the value of the >restricted activity. This is the case in some but not all restrictive >covenant cases and possibly it could be relevant in Hendrix. > >Peter. > > >Prof Peter Jaffey >Law Department >Brunel University >Uxbridge >Middx UB8 3PH > >Tel: 01895 274000 >Email: peter.jaffey@brunel.ac.uk >Web: http://www.brunel.ac.uk/depts/law/index.htm > >____________________________________________________________________ > This message was delivered through the Restitution Discussion Group, > an international internet LISTSERV devoted to all aspects of the law > of unjust enrichment. To subscribe, send "subscribe enrichment" in > the body of a message to . To unsubscribe, > send "signoff enrichment" to the same address. To make a posting to > all group members, send to . The list is > run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email > . _________________________________________________________________ Hotmail now available on Australian mobile phones. Go to http://ninemsn.com.au/mobilecentral/hotmail_mobile.asp ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 01:58:53 +0200 Reply-To: Hanoch Dagan Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Hanoch Dagan Subject: Re: On profits and use-value In-Reply-To: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii"; format=flowed Dear all, I agree with much of Jamie's analysis. I would add that the choice between these two remedies is (as actually implied in Jamie's own comments) a choice between deterring potential appropriators of people's entitlements (profits) and preserving the value of people's entitlements (use-value). This choice, in turn, requires a normative choice as to the content of such an entitlement: the former implies a libertarian entitlement, vindicating people's negative liberty; the latter implies a utilitarian entitlement, vindicating their well-being. Hendrix thus stands for the (normatively appealing) propositions that the entitlement of a commercial promisee in the performance of the promise may be utilitarian, and that there are only exceptional circumstances (such as Blake) where an entitlement of a promisee would be libertarian. Hanoch At 01:23 27/03/03 +0000, James Edelman wrote: >Dear all, > >I certainly agree with Peter that the claim in Hendrix was not one of >disgorgement damages. But I do not think that the decision supports the >thesis in his stimulating monograph, The Nature and Scope of Restitution, >that a "use claim" (restitutionary damages) does not arise from a wrong >(here the breach of contract) but is based on an imputed contract between >the parties. It seems to me that the Court of Appeal, having rejected the >disgorgement damages award (account of profits) for the breach of contract, >was quite clearly awarding restitutionary damages (the use claim) for the >breach of contract. > >In relation to the rationale for each, I don't think it is possible to >support disgorgement damages as a type of surrogate for compensation. When >a court focuses exclusively upon stripping the profits of a defendant the >only possible rationale I can see is to deter the defendant, and others, >from commission of that wrong. Undoubtedly there will be difficulties in >determining how that profit should be measured (for instance, to what extent >should allowances for skill and effort be given as expenses incurred, should >opportunity costs should be allowed as expenses) but this should not >distract from the deterrent focus of this award. Courts have long >emphasised that the award of an account of profits (disgorgement damages) >for a breach of fiduciary duty is based upon deterrence. Other >profit-stripping or disgorgement damages awards should be no different. > >I also agree that the use-value claim is restitutionary. And where it is >given for a wrong, perhaps it should be called "restitutionary damages" (to >differentiate it from restitution for unjust enrichment). The basis and >rationale for this claim depends upon the cause of action which gives rise >to it. Where courts say that these restitutionary awards are given for a >wrong (in this case, the breach of contract) I think they should be taken at >their word. There is no necessary reason why we should say that what the >judges really meant was that the claim was one for an imputed contract or >that it should be re-interpreted as a claim in unjust enrichment. The >rationale in such cases is simply that there was a wrongful transfer. If it >is possible to reverse transfers for other reasons then it must be possible >to reverse a transfer where it is recognised that it has been wrongfully >made. For a superb explanation of the corrective justice basis of reversal >of transfers (although focussing on unjust enrichment) see Lionel Smith's >discussion of Weinrib's "The Idea of Private Law" in (2001) Texas Law Rev >2115. > > >Jamie Hanoch Dagan Affiliated Overseas Professor University of Michigan School of Law 625 South State Street Ann Arbor, MI 48109-1215 (734) 647-7352 (o) (734) 764-8309 (fax) hdagan@umich.edu ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 08:38:41 +0000 Reply-To: peter.jaffey@brunel.ac.uk Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Peter Jaffey Subject: Hendrix/disgorgement MIME-Version: 1.0 Content-Type: TEXT/PLAIN; CHARSET=US-ASCII On the disgorgement issue, Hanoch and Jamie misunderstand the basis of the uncompensability argument for disgorgement in contract. It is quite true that disgorgement is not a "surrogate for compensation" or a "solution for undercompensation", and that it is designed to remove the profits of wrongdoing. My argument, in slightly fuller form, goes as follows: 1. Ordinarily a contracting party does not have a duty to perform the contract. He is free not to perform, although he is responsible for any loss incurred by the other party as a result of his non-performance. 2. If the contracting party finds himself in a position such that, if he does not perform, the other party will incur uncompensable loss, he does become subject to a duty to perform. Then he acts wrongfully if he does not perform, and should be subject to disgorgement. In some contracts, like a fiduciary contracts, the nature of the contract is such that there is always a duty to perform. In other contracts the duty can arise out of particular circumstances which make actual performance crucial to avoid uncompensable loss. 3. Thus disgorgement should be subject to the uncompensability test, but this is because it is designed to remove the profits of wrongdoing, and to deter, and not because it serves to make up a shortfall in compensation or anything along those lines. Hanoch also argues, if I understand him correctly, that disgorgement is inefficient because of the high transaction costs involved in measuring profit and causation, and that contracting parties would never agree to it. (Hanoch refers to "probable intent", but I would understand this as a form of hypothetical contracting.) This may well be right. In fact, what contracting parties would surely agree to, if it were open to them to do so, is that if circumstances arose in which contracting party A would suffer uncompensable loss as a result of contracting party B's failure to perform, B should be subject to a stiff penalty if he chooses not to perform. Such a clause may not be enforceable if actually agreed, but in the US I understand that there is good authority that punitive damages would be awarded and in England, where it is open to the court to award disgorgement but not punitive damages, Hanoch's argument clearly would not have any weight against disgorgement. Lastly, the cases that I am aware of where disgorgement has been granted or where it has generally been thought appropriate, or where in the US punitive damages have been awarded, are all actually consistent with the suggested test. I would be interested in any counter-examples. Peter. Prof Peter Jaffey Law Department Brunel University Uxbridge Middx UB8 3PH Tel: 01895 274000 Email: peter.jaffey@brunel.ac.uk Web: http://www.brunel.ac.uk/depts/law/index.htm ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 09:45:17 +0000 Reply-To: Steve Hedley Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Steve Hedley Subject: Hendrix - just a confusion? In-Reply-To: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" It seems to me that Jamie and Peter (and, for that matter, Hanoch and I) are in substantial agreement on the award in Hendrix. We agree that it is a quite different beastie from the award in Blake, that the court was right to reject a Blake-type remedy here, and we also agree on how to calculate the applicable measure. What's to fight about? However: * Some of us stress that there is a transfer of wealth in these cases; * Others stress that the transfer results in a gain to the defendant; * Still others stress that it results in a loss to the claimant; * Other others note that the transfer is treated much like a contract. Yet each one of these descriptions is true as far as it goes, and none is necessarily inconsistent with any of the others. ("I'm looking at the elephant's tail!" is not inconsistent with "Yeah? Well, I'm looking at its trunk!") The descriptions are actually not very different from one another, and I'm not convinced the differences matter. Yet Jamie suggests there is an inconsistency. However, while he makes a good case for his own description, he is wrong to say this constitutes disproof of other descriptions. I suggest, on the contrary, that we are getting bogged down with pseudo-arguments which are at root merely ones of terminology. A difference which makes no difference is no difference at all. If Jamie wants to establish that one description is BETTER than the others, he will have to use very different arguments from the ones he has employed so far - he should first prove that it makes any difference which description we pick, and if he can't do that, his other points against Peter collapse. Jamie wrote: >I do not think that the decision supports the thesis in his >stimulating monograph, The Nature and Scope of Restitution, >that a "use claim" (restitutionary damages) does not arise >from a wrong (here the breach of contract) but is based on an >imputed contract between the parties. It seems to me that the >Court of Appeal, having rejected the disgorgement damages >award (account of profits) for the breach of contract, was quite >clearly awarding restitutionary damages (the use claim) for the >breach of contract. But where is the inconsistency between Jamie's explanation and Peter's? Of course proof of a wrong is required - but the court's response to that wrong is indistinguishable from its saying that there is a contract to pay. Peter's description relies on the existence of a wrong just as much as Jamie's does. >Where courts say that these restitutionary awards are given for >a wrong (in this case, the breach of contract) I think they should >be taken at their word. All of us are "taking the courts at their word", though we often focus on different words, and argue over their meanings. >There is no necessary reason why we should say that what the >judges really meant was that the claim was one for an imputed >contract or that it should be re-interpreted as a claim in unjust >enrichment. Of course - but no necessary reason not to say it, either. A good reason not to might consist of showing that Peter's view distorted what the court was doing. But merely pointing out that a different description is possible is not enough. Steve Hedley ============================================= FACULTY OF LAW, UNIVERSITY OF CAMBRIDGE e-mail : steve.hedley@law.cam.ac.uk ansaphone : +44 1223 334931 www.stevehedley.com fax : +44 1223 334967 Christ's College Cambridge CB2 3BU ============================================= ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 10:43:40 +0000 Reply-To: Andrew Tettenborn Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Andrew Tettenborn Subject: Re: Hendrix Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Can I put in my 2 cents' worth on Hendrix? The real trouble with Hendrix is that it seems to have been argued, and therefore decided, as though Blake was somehow relevant to the remedy to be granted. This seems to me to be a mistake. As most of us, bar Andrew, now seem to agree, disgorgement (whole profit) is fundamentally diferent from "use value", "royalty basis" or "buy-out cost" (all of which are very similar and yield part profit). My own view is that the latter are all essentially loss-based, and that there isn't much point in trying to shoehorn them into unjust enrichment. It also follows that Hendrix isn't really an unjust enrichment case at all. The reasons: 1. Buy-out appears not only in Wrotham-style cases but also in, for example, eminent domain compensation, where profit/enrichment isn't in issue (eg Stokes v Cambridge Corp'n (1961) 13 P. & CR 77). 2. Use value or buy-out is simply a rough and ready measure of loss where the plaintiff has been deprived of the use of a thing or the benefit of some legal right. A thief who steals my picture has to pay me its value even if I hate it, never look at it and plan to burn it as soon as it stops raining: faute de mieux, this is the only plausible way of reckoning my damage. Similarly with "borrowing" my car, or using my music contrary to a previous settlement agreement, as in Hendrix: I've been deprived of something, and a perfectly sensible way of quantifying my damage is use value or royalty value. 3. There are cases where total profit may come in even though the plaintiff's claim is loss-based and there is no argument for a Blake award. That is where I would have made the profit myself. I agree by contract to let you use my land for dumping trash, and further agree that you can charge others to use it, which you do. In breach of contract I lock the gate against you and your customers and charge my own customers to use the facility just as you would have. Here I have to pay over the whole profit: the reason is that in this scenario we don't need a rough and ready measure, because we have a more precise one. As you might imagine, this is a real (US) case: see Short v Wise, 718 P.2d 604 (Kansas 1986), & the comments on it in Beck v Northern Natural Gas Co, 170 F.3d 1018 (1999). All the best Andrew >From: James Edelman >Subject: Re: [RDG:] Hendrix >To: ENRICHMENT@LISTS.MCGILL.CA > >Dear all, > >I certainly agree with Peter that the claim in Hendrix was not one of >disgorgement damages. But I do not think that the decision supports the >thesis in his stimulating monograph, The Nature and Scope of Restitution, >that a "use claim" (restitutionary damages) does not arise from a wrong >(here the breach of contract) but is based on an imputed contract between >the parties. It seems to me that the Court of Appeal, having rejected the >disgorgement damages award (account of profits) for the breach of contract, >was quite clearly awarding restitutionary damages (the use claim) for the >breach of contract. > >In relation to the rationale for each, I don't think it is possible to >support disgorgement damages as a type of surrogate for compensation. When >a court focuses exclusively upon stripping the profits of a defendant the >only possible rationale I can see is to deter the defendant, and others, >from commission of that wrong. Undoubtedly there will be difficulties in >determining how that profit should be measured (for instance, to what extent >should allowances for skill and effort be given as expenses incurred, should >opportunity costs should be allowed as expenses) but this should not >distract from the deterrent focus of this award. Courts have long >emphasised that the award of an account of profits (disgorgement damages) >for a breach of fiduciary duty is based upon deterrence. Other >profit-stripping or disgorgement damages awards should be no different. > >I also agree that the use-value claim is restitutionary. And where it is >given for a wrong, perhaps it should be called "restitutionary damages" (to >differentiate it from restitution for unjust enrichment). The basis and >rationale for this claim depends upon the cause of action which gives rise >to it. Where courts say that these restitutionary awards are given for a >wrong (in this case, the breach of contract) I think they should be taken at >their word. There is no necessary reason why we should say that what the >judges really meant was that the claim was one for an imputed contract or >that it should be re-interpreted as a claim in unjust enrichment. The >rationale in such cases is simply that there was a wrongful transfer. If it >is possible to reverse transfers for other reasons then it must be possible >to reverse a transfer where it is recognised that it has been wrongfully >made. For a superb explanation of the corrective justice basis of reversal >of transfers (although focussing on unjust enrichment) see Lionel Smith's >discussion of Weinrib's "The Idea of Private Law" in (2001) Texas Law Rev >2115. > > >Jamie > >>From: Peter Jaffey >>Reply-To: peter.jaffey@brunel.ac.uk >>To: ENRICHMENT@LISTS.MCGILL.CA >>Subject: [RDG:] Hendrix >>Date: Wed, 26 Mar 2003 14:26:59 +0000 >> >>I agree that the Blake full profit measure should be exceptional. As I have >>suggested before I think it should be available only where the claimant >>will >>suffer significant uncompensable harm if the defendant does not perform the >>contract. This accounts for disclosure of information cases including >>government secrets and also generally negative obligations, because here >>generally the claimant cannot get substitute performance from someone else. >>It also accounts for fiduciary cases, but I would not say that the >>availability of the full profit measure is dependent on the contract's >>being >>"close to fiduciary", because there are cases where this test is satisfied >>that are clearly not fiduciary because there is no discretion involved. >> >>I also agree that the full profit measure should be kept quite distinct >>from the "reasonable payment" measure. The two are based on quite different >>principles. A few years ago I used the expressions "disgorgement damages" >>and "restitutionary damages" to distinguish between them. Disgorgement is >>based on the principle that a wrongdoer should not profit from a wrong, so >>the question in contract is when it is really wrongful not to perform a >>contract, and I think this is where uncompensable harm will result. In the >>original trespass cases and the IP cases the basis of the "restitutionary >>damages" claim seems to me to be simply the right of an owner to the >>"use-value" of the property, by virtue of which he can exact a reasonable >>payment for use. But this cannot be applied straightforwardly to contract. >>Possibly it would apply where the very purpose of a contractual restriction >>was to enable a fee to be subsequently exacted in return for waiving the >>restriction, giving the claimant a right to some part of the value of the >>restricted activity. This is the case in some but not all restrictive >>covenant cases and possibly it could be relevant in Hendrix. >> >>Peter. >> >> >>Prof Peter Jaffey >>Law Department >>Brunel University >>Uxbridge >>Middx UB8 3PH >> >>Tel: 01895 274000 >>Email: peter.jaffey@brunel.ac.uk >>Web: http://www.brunel.ac.uk/depts/law/index.htm >> >>__________________________________________________________________ __ >> This message was delivered through the Restitution Discussion Group, >> an international internet LISTSERV devoted to all aspects of the law >> of unjust enrichment. To subscribe, send "subscribe enrichment" in >> the body of a message to . To unsubscribe, >> send "signoff enrichment" to the same address. To make a posting to >> all group members, send to . The list is >> run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email >> . > > >_________________________________________________________________ >Hotmail now available on Australian mobile phones. Go to >http://ninemsn.com.au/mobilecentral/hotmail_mobile.asp > >____________________________________________________________________ > This message was delivered through the Restitution Discussion Group, > an international internet LISTSERV devoted to all aspects of the law > of unjust enrichment. To subscribe, send "subscribe enrichment" in > the body of a message to . To unsubscribe, > send "signoff enrichment" to the same address. To make a posting to > all group members, send to . The list is > run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email > . > Andrew Tettenborn MA LLB Bracton Professor of Law Tel: 01392-263189 / +44-392-263189 (international) Mobile: 07729-266200 / +44-7729-266200 (international) Fax: 01392-263196 / +44-392-263196 (international) Snailmail: School of Law, University of Exeter, Amory Building, Rennes Drive, Exeter EX4 4RJ England [School homepage: http://www.ex.ac.uk/law/ ] [My homepage: http://www.ex.ac.uk/law/staff/tettenborn/index.html]. ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 08:53:20 -0500 Reply-To: Hanoch Dagan Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Hanoch Dagan Subject: Re: Hendrix/disgorgement In-Reply-To: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii"; format=flowed Dear all: I tend to agree with Steve that Peter, Jamie, Steve & I are basically in agreement on Hendrix and that some of our conversation is based on confusion. Peter indeed pointed out to my own misunderstanding -- for which I apologize -- with regard to what he means by uncompensable loss. To my defense I can say (for what it's worth) that some other courts and commentators do make a case for disgorgement in contract by referring to the promisor's profits as a "solution for undercompensation." I am also not sure that the term "uncompensable loss" best describes the types of cases Peter refers to (although again, once we agree on the substance, I am not that much concerned with terminological disputes). If I understand him correctly, in addition to the category of fiduciaries (and alike: Blake...), Peter refers to the same types of cases Allan Farnsworth addressed in his "Your Loss or My Gain? The Dilemma of the Disgorgement Principle in Breach of Contract." (94 Yale L.J. 1339 (1985)), namely: cases in which, as a result of the breach, the promisee is left with a skimped performance and no opportunity to use her return performance to attempt to obtain a substitute (the typical example Farnsworth gives is of a case of a contractor who secretly substitutes cheaper materials for the more expensive ones contracted for: because in such cases courts usually limit the promisee's recovery to the diminution in value of the structure, which may be far less than the cost of reconstruction, the breach leaves the promisee with no opportunity to purchase the performance she desired). Farnsworth claimed -- and I agree -- that the potential advantage of disgorgement in deterring breach in these cases he defines as abuse of contract outweigh their administrative costs, and that (for that reason) contractual parties are likely to endorse a rule that assures promisees against skimped performance. He suggested -- and I agree again -- to call this category of cases "abuse of contract." Hanoch Hanoch Dagan Affiliated Overseas Professor University of Michigan School of Law 625 South State Street Ann Arbor, MI 48109-1215 (734) 647-7352 (o) (734) 764-8309 (fax) hdagan@umich.edu ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 09:40:15 -0500 Reply-To: Lionel Smith Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Lionel Smith Subject: disgorgement In-Reply-To: MIME-version: 1.0 Content-type: text/plain; format=flowed; charset=us-ascii I register my disagreement with the proposition stated by a number of people who have posted, that disgorgement (or full disgorgement) can only be justified on the basis of deterrence. There is a perfectly good argument that the profits must be surrendered as a matter of corrective justice. Then there is a second order issue, whether this is appropriate for all wrongs or only some wrongs. I thank Jamie for his kind words, although I note that one implication of my position to which he refers is this. If there has been a transfer which is normatively untenable, it must be reversed whether or not the defendant has done anything wrong. Hence the category 'restitution (in the narrow sense that excludes disgorgement) for wrongs' may be otiose, inasmuch as the wrong is not doing any normative work to explain restitution. Looking at it from the other direction, if the wrong is one which supports disgorgement, then the defendant must give up any gain; any deprivation of the plaintiff becomes immaterial, and so again the category 'restitution (in the narrow sense that excludes disgorgement) for wrongs' looks unnecessary. Lionel ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 10:37:55 -0500 Reply-To: Hanoch Dagan Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Hanoch Dagan Subject: Re: disgorgement and corrective justice In-Reply-To: <5.1.0.14.2.20030327091559.02a18ea8@staff.mcgill.ca> Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii"; format=flowed Dear all: I feel that I have taken way too much space in the conversation in the past few days, so I will only briefly respond to Lionel's invocation of corrective justice. I think that the question is not whether corrective justice is relevant to the justification of full disgorgement. Rather, the ultimate question is whether such a justification can be fully articulated without any reference to the normative question of whether the plaintiff's entitlement is (or should be) libertarian, as opposed to utilitarian. Choosing the former (but not the latter) implies a right to exclusive control which, in turn, can only be fully vindicated with a set of remedial rules that effectively deter potential infringers. I discuss these issues in much more detail in my critique of Weinrib in 98 Michigan L. Rev. 138 (1999). Hanoch At 09:40 AM 3/27/03 -0500, Lionel Smith wrote: >I register my disagreement with the proposition stated by a number of >people who have posted, that disgorgement (or full disgorgement) can only >be justified on the basis of deterrence. There is a perfectly good argument >that the profits must be surrendered as a matter of corrective justice. >Then there is a second order issue, whether this is appropriate for all >wrongs or only some wrongs. Hanoch Dagan Affiliated Overseas Professor University of Michigan School of Law 625 South State Street Ann Arbor, MI 48109-1215 (734) 647-7352 (o) (734) 764-8309 (fax) hdagan@umich.edu ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Thu, 27 Mar 2003 10:49:57 -0500 Reply-To: jneyers@uwo.ca Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Jason Neyers Organization: University of Western Ontario Subject: Re: Hendrix/disgorgement MIME-Version: 1.0 Content-Type: multipart/alternative; boundary="------------DC02219ACC14D9676FB89DBC" --------------DC02219ACC14D9676FB89DBC Content-Type: text/plain; charset=iso-8859-1 Content-Transfer-Encoding: quoted-printable Dear All, I want to echo Lionel=92s point that I do not think that gain-based or no= n-loss based damages for breach of contract (whether in the reasonable use-value= measure or full disgorgement measure) need to be understood in policy terms, such= as deterrence, at all. In other words, that cases like Blake and Hendrix (w= hich I still have to work through) can be understood as manifestations of correc= tive justice. The argument, which is of course still tentative, is as follows= : 1. The right to property includes, to use the civilian expression, the ri= ght to the use, fruits, and abuse (destruction/sale) of the property. 2. In general, violations of property rights usually take two forms: (a) = an unauthorized use which leaves the property intact (which allows for tradi= tional compensation or the reasonable use value damages); (b) an authorized sale= through which the property cannot be returned (which allows for traditional compe= nsation or the sale price received by the wrongdoer). 3. It is plausible to view all of the remedies give in (a) and (b) as vin= dicating the right of the property owner since the right to property includes the = right to this gain (the use and fruits), see Weinrib=92s Restitutionary Damages as= CJ. The wrongdoer, or other wrongdoers, might be deterred because of these awards= but that is merely the flip side of the gain-based award whose purpose is to = undo the violation of the rights of the plaintiff. [In any event, the award might = not deter this wrongdoer, or other wrongdoers, given the likelihood of detect= ion in the future but the courts do not routinely increase the award on this bas= is, an increase which would be in line with the deterrence rationale]. 4. The question then is: When can a contractual right be treated as if it= were a property right? A =93judicial consensus=94 seems to be emerging that a c= ontractual right can be thus treated when the court would have given an injunction o= r ordered specific performance, see e.g., Bank of America Canada v Clarica = Trust, (2002), 211 DLR (4th) 385 (SCC) and the cases cited in Waddams, The Law o= f Damages, 3rd ed, (Toronto: Canada Law Book, 1997) at =A79.200. Why? Beca= use in those types of cases, only the giving of the actual thing promised, rathe= r than a payment of money, will undo the violation of the plaintiff=92s right (i.e= =2E compensate them) when the defendant refuses to perform. 5. Assuming that in cases of SP/injunction a contractual right to perform= ance will be treated as if the plaintiff has actual ownership of the thing pro= mised, the question then becomes which type of property interference has the def= endant committed (on the facts of the particular case) by breaching the contract= =2E Is it more like a sale-type infraction which leads to the profits from the sale= (a plausible interpretation of Blake), or is it more like a use-type infract= ion which leads to reasonable user-damages (which from the description thus f= ar, seems like a plausible interpretation of Hendrix). 6. Thus, non-loss based damages should be available for breaches of contr= act (in rare circumstances) but the court does not have a discretion (or sliding = scale) to award whatever it feels like on the facts of a given case. They can on= ly award those damages that undo the wrong represented by the breach in the partic= ular circumstances. Jason -- Jason Neyers Assistant Professor of Law Faculty of Law University of Western Ontario N6A 3K7 (519) 661-2111 x. 88435 Hanoch Dagan wrote: > Dear all: > > I tend to agree with Steve that Peter, Jamie, Steve & I are basically i= n > agreement on Hendrix and that some of our conversation is based on > confusion. Peter indeed pointed out to my own misunderstanding -- for > which I apologize -- with regard to what he means by uncompensable loss= =2E > > To my defense I can say (for what it's worth) that some other courts an= d > commentators do make a case for disgorgement in contract by referring t= o > the promisor's profits as a "solution for undercompensation." > > I am also not sure that the term "uncompensable loss" best describes th= e > types of cases Peter refers to (although again, once we agree on the > substance, I am not that much concerned with terminological disputes). = If > I understand him correctly, in addition to the category of fiduciaries = (and > alike: Blake...), Peter refers to the same types of cases Allan Farnswo= rth > addressed in his "Your Loss or My Gain? The Dilemma of the Disgorgement= > Principle in Breach of Contract." (94 Yale L.J. 1339 (1985)), namely: c= ases > in which, as a result of the breach, the promisee is left with a skimpe= d > performance and no opportunity to use her return performance to attempt= to > obtain a substitute (the typical example Farnsworth gives is of a case = of a > contractor who secretly substitutes cheaper materials for the more > expensive ones contracted for: because in such cases courts usually lim= it > the promisee's recovery to the diminution in value of the structure, wh= ich > may be far less than the cost of reconstruction, the breach leaves the= > promisee with no opportunity to purchase the performance she desired). > Farnsworth claimed -- and I agree -- that the potential advant= age of > disgorgement in deterring breach in these cases he defines as abuse of > contract outweigh their administrative costs, and that (for that reason= ) > contractual parties are likely to endorse a rule that assures promisees= > against skimped performance. He suggested -- and I agree again -- to c= all > this category of cases "abuse of contract." > > Hanoch > > Hanoch Dagan > Affiliated Overseas Professor > University of Michigan School of Law > 625 South State Street > Ann Arbor, MI 48109-1215 > (734) 647-7352 (o) > (734) 764-8309 (fax) > hdagan@umich.edu > > ____________________________________________________________________ > This message was delivered through the Restitution Discussion Group, > an international internet LISTSERV devoted to all aspects of the law > of unjust enrichment. To subscribe, send "subscribe enrichment" in > the body of a message to . To unsubscribe, > send "signoff enrichment" to the same address. To make a posting to > all group members, send to . The list is > run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, emai= l > . --------------DC02219ACC14D9676FB89DBC Content-Type: text/html; charset=iso-8859-1 Content-Transfer-Encoding: quoted-printable Dear All,

I want to echo Lionel=92s point that I do not think that gain-based or= non-loss based damages for breach of contract (whether in the reasonable use-value measure or full disgorgement measure) need to be understood in policy terms, such as deterrence, at all. In other words, that case= s like Blake and Hendrix (which I still have to work through)= can be understood as manifestations of corrective justice. The argu= ment, which is of course still tentative, is as follows:

1. The right to property includes, to use the civilian expression, the= right to the use, fruits, and abuse (destruction/sale) of the property.

2. In general, violations of property rights usually take two forms: (a) an unauthorized use which leaves the property intact (which allows for traditional compensation or the reasonable use value damages); (b) an authorized sale through which the property cannot be returned (which allows for traditional compensation or the sale price received by the wro= ngdoer).

3. It is plausible to view all of the remedies give in (a) and (b) as vindicating the right of the property owner since the right to property includes the right to this gain (the use and fruits), see Weinrib=92s Res= titutionary Damages as CJ. The wrongdoer, or other wrongdoers, might be deterred beca= use of these awards but that is merely the flip side of the gain-based award whose purpose is to undo the violation of the rights of the plaintiff. [In any event, the award might not deter this wrongdoer, or other wrongdo= ers, given the likelihood of detection in the future but the courts do not rou= tinely increase the award on this basis, an increase which would be in line with= the deterrence rationale].

4. The question then is: When can a contractual right be treated as if it were a property right? A =93judicial consensus=94 seems to be= emerging that a contractual right can be thus treated when the court would have given an injunction or ordered specific performance, see e.g., Bank of America Canada v Clarica Trust, (2002), 211 DLR (4th) 385 (SCC) and the cases cited in Waddams, The Law of Damages, 3rd ed, (Toronto: Canada Law Book, 1997) at §9.200. Why? Because in those types of cases, only the giving of the actual thing promised, rather than a payment of money, will undo the violation of the plaintiff=92s right (i.e. compensat= e them) when the defendant refuses to perform.

5. Assuming that in cases of SP/injunction a contractual right to perf= ormance will be treated as if the plaintiff has actual ownership of the thing pro= mised, the question then becomes which type of property interference has the def= endant committed (on the facts of the particular case) by breaching the contract= =2E Is it more like a sale-type infraction which leads to the profits from the sale (a plausible interpretation of Blake), or is it more like= a use-type infraction which leads to reasonable user-damages (which from the description thus far, seems like a plausible interpretation of Hen= drix).

6. Thus, non-loss based damages should be available for breaches of contract (in rare circumstances) but the court does not have a discretion= (or sliding scale) to award whatever it feels like on the facts of a give= n case. They can only award those damages that undo the wrong represented by the breach in the particular circumstances.

Jason

--
Jason Neyers
Assistant Professor of Law
Faculty of Law
University of Western Ontario
N6A 3K7
(519) 661-2111 x. 88435
Hanoch Dagan wrote:

Dear all:
I tend to agree with Steve that Peter, Jamie, Steve & I are basica= lly in
agreement on Hendrix and that some of our conversation is based on
confusion. Peter indeed pointed out to my own misunderstanding -- for
which I apologize -- with regard to what he means by uncompensable loss.
To my defense I can say (for what it's worth) that some other courts and
commentators do make a case for disgorgement in contract by referring= to
the promisor's profits as a "solution for undercompensation."
I am also not sure that the term "uncompensable loss" best describes the
types of cases Peter refers to (although again, once we agree on the
substance, I am not that much concerned with terminological disputes)= =2E If
I understand him correctly, in addition to the category of fiduciarie= s (and
alike: Blake...), Peter refers to the same types of cases Allan Farns= worth
addressed in his "Your Loss or My Gain? The Dilemma of the Disgorgeme= nt
Principle in Breach of Contract." (94 Yale L.J. 1339 (1985)), namely:= cases
in which, as a result of the breach, the promisee is left with a skim= ped
performance and no opportunity to use her return performance to attem= pt to
obtain a substitute (the typical example Farnsworth gives is of a cas= e of a
contractor who secretly substitutes cheaper materials for the more
expensive ones contracted for: because in such cases courts usually limit
the promisee's recovery to the diminution in value of the structure, which
may be far less than the cost of reconstruction, the breach lea= ves the
promisee with no opportunity to purchase the performance she desired)= =2E
Farnsworth claimed -- and I agree -- that the potential advantage of
disgorgement in deterring breach in these cases he defines as abuse of
contract outweigh their administrative costs, and that (for that reas= on)
contractual parties are likely to endorse a rule that assures promise= es
against skimped performance. He suggested -- and I agree again -- to call
this category of cases "abuse of contract."
Hanoch
Hanoch Dagan
Affiliated Overseas Professor
University of Michigan School of Law
625 South State Street
Ann Arbor, MI 48109-1215
(734) 647-7352 (o)
(734) 764-8309 (fax)
hdagan@umich.edu
_________________________________________________________________ ___
This message was delivered through the Restitution Discussion Group,
an international internet LISTSERV devoted to all aspects of the law
of unjust enrichment. To subscribe, send "subscribe enrichment"= in
the body of a message to <listserv@lists.mcgill.ca>. To unsu= bscribe,
send "signoff enrichment" to the same address. To make a postin= g to
all group members, send to <enrichment@lists.mcgill.ca>. The= list is
run by Lionel Smith of McGill University, tel. (+1) 514 398 663= 5, email
<lionel.smith@mcgill.ca>.

--------------DC02219ACC14D9676FB89DBC-- ____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email . ============================================================= ============ Date: Fri, 28 Mar 2003 13:38:16 -0500 Reply-To: Lionel Smith Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Lionel Smith Subject: Blake with a twist MIME-version: 1.0 Content-type: text/html; charset=us-ascii R, Kiwi and former SAS member, wanted to publish an account of his experiences in the first Gulf War, having signed a confidentiality agreement after the fact but while still in the SAS.

As a result, the Attorney-General on behalf of the Crown commenced proceedings in the High Court of New Zealand, claiming an injunction to restrain publication, damages and an account of profits.

By way of defence, R pleaded that he had signed the contract under military orders, that it had been obtained by duress or undue influence, that it was an unconscionable bargain, not supported by consideration, contrary to New Zealand public policy as a restraint of trade and upon its true construction not intended to prohibit the publication of material which was no longer confidential.

The NZCA held:

that the contract was valid and that R was in breach. As a matter of discretion it refused an injunction to restrain publication but made an order for an account and an assessment of damages. There is no appeal by the Crown against the refusal of an injunction but R appeals against the orders made against him and challenges the rejection by the Court of Appeal of all the grounds upon which he alleges that the contract was invalid.

The majority of the PC affirmed, but (unusually) there was a dissent. Lord Scott thought that the contract was made under undue influence.

Blake not cited ...

"R" v. Her Majesty's Attorney-General for England and Wales (Appeal No. 61 of 2002) (17 March 03), available at http://www.privy- council.org.uk/

Lionel
____________________________________________________________________ This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, tel. (+1) 514 398 6635, email .