chapter
(e) Restitution (unjust enrichment)
Pages 8

Evans LJ: During the 1980s a number of local authorities entered the financial markets in order to trade in a new form of derivative, known as interest rate swaps contracts. Then the courts held that these contracts were ultra vires the local authorities and therefore void: Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1. That judgment launched what has been called a great raft of litigation… More than 100 writs were issued, mostly in the Commercial Court, claiming to recover the net amounts which had been paid out by one party or the other under the void contracts…

The right of recovery…was established by a number of judgments… The claims fall within the principle of unjust enrichment, giving the plaintiffs a right to restitution which the courts have upheld…

The principle of unjust enrichment is recognised in English as in other systems of law. It requires the recipient of money to repay it when the circumstances are such that it is contrary to ‘the ties of natural justice and equity’ for him to retain it; cf Lord Mansfield CJ’s celebrated dictum in Moses v Macferlan (1760) 2 Burr 1005, p 1012. How those circumstances may be identified has been the subject of countless judicial decisions over the centuries. A number of recognisable forms of action emerged from the mists of legal history. These entitled the plaintiff to recover, not damages, but a quantified sum from the defendant who was not necessarily a wrongdoer and who was not bound by any contract or express undertaking to pay the sum claimed by the plaintiff. The circumstances in which such a non-contractual obligation can arise are various; the recovery of money paid under a mistake of fact (though not, historically and so far as English law is concerned, under a mistake of law), or where the consideration in return for which the money paid has failed, are well-established examples. Now, the mists have cleared still further. It is recognised that these different forms spring from a single underlying principle, which is described as the right to recover on grounds of unjust enrichment; that is to say, the defendant has been unjustly enriched by the payment made to him and which the plaintiff seeks to recover…

That the principle forms part of English law has been authoritatively recognised in two recent judgments of the House of Lords: Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 and Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70.