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Doyle, Sam; Wright, David --- "Restitutionary Damages -- The Unnecessary Remedy?" [2001] MelbULawRw 1; (2001) 25(1) Melbourne University Law Review 1


Restitutionary Damages — The Unnecessary Remedy?

SAM DOYLE[*] AND DAVID WRIGHT[†]

[A monetary remedy that is measured according to the gain to the defendant, rather than to the loss to the plaintiff, is being increasingly sought. There has been relatively little attempt to explore the most appropriate doctrinal basis for such a remedy. This monetary gain-stripping remedy is often referred to as ‘restitutionary damages’. This article questions the need for this new form of common law damages. The article examines the ability of the law to respond to the desire to award victims of common law wrongs a gain-based remedy and investigates whether, as a matter of principle, the equitable remedy of an account of profits should be available, in appropriate cases, to victims of common law wrongs. The choice between restitutionary damages and an account of profits is not one between meaningless labels. Rather, the doctrinal basis for the remedy will inform and provide the appropriate framework for the debate as to the circumstances in which the remedy should be available. It will determine whether the remedy is discretionary and subject to the usual equitable defences. It may also impact upon the extent of the remedy when awarded, and have a number of practical consequences.]

INTRODUCTION

The desire to award victims of common law wrongs a monetary remedy measured by the gain made by the defendant, rather than by the loss suffered by the plaintiff, is an understandable one. The widespread support for a gain-stripping remedy for common law wrongs has led to much debate as to the circumstances in which it should be available.[1] However, there has been relatively little attempt to explore the most appropriate doctrinal basis for the remedy. The remedy is often referred to as ‘restitutionary damages’ and is assumed to be a new form of common law damages. Indeed, the label ‘restitutionary damages’ is frequently employed in such a way that it encompasses all gain-stripping remedies, including the equitable remedy of an account of profits.

This article questions the need for this new form of common law damages, which is linguistically confusing and sits uncomfortably with the traditional compensatory hegemony of common law damages.[2] It examines the ability of the law to award victims of common law wrongs a gain-based remedy by providing the equitable remedy of an account of profits, and concludes that, as a matter of principle, this remedy should be available, in appropriate cases, to victims of common law wrongs.

The choice between ‘restitutionary damages’ and an ‘account of profits’ is not one between meaningless labels. Rather, the doctrinal basis for the remedy will inform (or, at the very least, provide the appropriate framework for) the debate as to the circumstances in which the remedy should be available. It will determine whether the remedy is equitable, and hence discretionary and subject to the usual equitable defences. It may also impact upon the extent of the remedy when awarded, and have a number of practical, rather than doctrinal, consequences.

II THE DISTINCTION BETWEEN COMPENSATORY AND GAIN-STRIPPING REMEDIES

There is a fundamental distinction between remedies which compensate a plaintiff for the loss they suffer by reason of a wrong committed by the defendant, and remedies which strip the defendant of any profit or gain made through the commission of a wrong (commonly referred to as restitutionary[3] remedies). The distinction follows from the obvious fact that the plaintiff’s loss will frequently differ in amount from the defendant’s gain. In Colbeam Palmer Ltd v Stock Affiliates Pty Ltd, Windeyer J described the difference between a gain-stripping remedy (in that case an account of profits) and compensatory damages in the following terms:

The distinction between an account of profits and damages is that by the former the infringer is required to give up his ill-gotten gains to the party whose rights he has infringed: by the latter he is required to compensate the party wronged for the loss he has suffered. The two computations can obviously yield different results, for a plaintiff’s loss is not to be measured by the defendant’s gain, nor a defendant’s gain by the plaintiff’s loss. Either may be greater, or less, than the other.[4]

The rationale for awarding a gain-stripping remedy is generally said to be that no person should be permitted to profit from their own wrongdoing. The deterrent effect of such an award is also often referred to as a rationale or policy basis for a gain-stripping remedy. Although both of these considerations provide strong support for the capacity of the law to award a gain-stripping remedy in response to common law wrongs, it is unlikely that they justify the general availability of such a remedy. Further, given the general nature of both of these considerations, they are unlikely to provide any significant assistance in identifying those exceptional cases in which a gain-stripping remedy is appropriate.[5]

For the purposes of this article, however, we will assume the appropriateness of a gain-stripping remedy in at least some exceptional cases of common law wrongdoing, and attempt to identify the way in which the law should respond to the need for such a remedy. The process of identifying a principle on which to rely in providing a gain-stripping remedy is logically anterior to that of identifying isolated cases in which an application of this principle is appropriate. The academic literature has tended to focus on the latter task; in our view, it is the former which should inform the debate as to relevant applications.

The focus of this article is also limited to the need for, and availability of, a gain-stripping remedy which is personal and monetary in nature.[6] Such a remedy is commonly available in cases involving equitable wrongs (for example, breach of either a fiduciary obligation or an obligation of confidence) and takes the form of an account of profits. However, the traditional remedial response to common law wrongs (for example, tort and breach of contract) has been limited to an award of compensatory damages. As such, the entitlement of a victim of a common law wrong to a gain-stripping remedy is not nearly as settled as it is in the case of equitable wrongs. Where it is available, and in the academic literature discussing its availability, the remedy is generally referred to as restitutionary damages and assumed to be a new form of common law damages.[7]

III THE AVAILABILITY OF GAIN-STRIPPING REMEDIES FOR COMMON LAW WRONGS

Although any comprehensive review of when restitutionary damages are, or should be, available is beyond the scope of this article, a brief survey of the case law and academic literature is instructive.

A The Gain-Stripping Remedy in Tort Cases

A gain-stripping remedy is commonplace in relation to civil wrongs involving the infringement of intellectual property rights.[8] However, given the equitable origin of these torts, the availability of a gain-stripping remedy is not surprising. Indeed, the remedy given by the courts in these intellectual property cases is generally referred to as an equitable account of profits, rather than restitutionary damages.

Outside these intellectual property torts, the traditional view was that a gain-stripping remedy was only available where the defendant’s gain consisted of the plaintiff’s property or the proceeds of that property.[9] However, there are tort cases falling outside that description which, although sometimes couched in the language of compensatory damages, are best explained as involving awards of restitutionary damages.[10] For example, in Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd,[11] the English Court of Appeal calculated damages awarded for the tort of detinue by reference to a reasonable hiring charge for the period that the defendant had kept and used the plaintiff’s theatre equipment. Denning LJ’s analysis was overtly restitutionary:

If a wrongdoer has made use of goods for his own purposes, then he must pay a reasonable hire for them, even though the owner has in fact suffered no loss. It may be that the owner would not have used the goods himself, or that he had a substitute readily available, which he used without extra cost to himself. Nevertheless the owner is entitled to a reasonable hire ... The claim for a hiring charge is therefore not based on the loss to the plaintiff, but on the fact that the defendant has used the goods for his own purposes. It is an action against him because he has had the benefit of the goods. It resembles therefore, an action for restitution rather than an action of tort.[12]

Somervell and Romer LJJ’s reasoning, however, was couched in the language of compensation for the plaintiff’s loss.[13]

There have also been examples of awards of restitutionary damages in cases involving the tort of trespass.[14] Most recently, the English Court of Appeal in Ministry of Defence v Ashman[15] awarded restitutionary damages against a defendant tenant in favour of a plaintiff landlord for the tort of trespass. Hoffmann LJ explained:

A person entitled to possession of land can make a claim against a person who has been in occupation without his consent on two alternative bases. The first is for the loss which he has suffered in consequence of the defendant’s trespass. This is the normal measure of damages in the law of tort. The second is the value of the benefit which the occupier has received. This is a claim for restitution. The two bases of claim are mutually exclusive and the plaintiff must elect before judgment which of them he wishes to pursue. These principles are not only fair, but, as Kennedy LJ demonstrated, also well established by authority.
It is true that in earlier cases it has not been expressly stated that a claim for mesne profit for trespass can be a claim for restitution. Nowadays I do not see why we should not call a spade a spade. In this case the Ministry of Defence elected for the restitutionary remedy.[16]

Although these authorities demonstrate the availability of restitutionary damages in some tortious matters (where traditionally such damages had been unavailable), they are nevertheless limited to cases involving so-called ‘proprietary torts’.[17] They do not support the general availability of restitutionary damages for torts.[18]

B The Gain-Stripping Remedy in Breach of Contract Cases

Until the recent decision of A-G (UK) v Blake in the English Court of Appeal,[19] and the appeal from that decision to the House of Lords last year,[20] an authority for an award of restitutionary damages for breach of contract was virtually non-existent.[21] For example, in both Tito v Waddell (No 2)[22] and Surrey County Council v Bredero Homes Ltd[23] the courts refused claims for restitutionary damages for breach of contract.

Some academics have suggested that the decision of Brightman J in Wrotham Park Estate Co v Parkside Homes Ltd[24] is an example of an award of restitutionary damages for breach of contract. In that case, the defendants had built a number of houses in breach of a restrictive covenant. Although Brightman J’s reasoning was not overtly restitutionary, the award of damages in that case is probably best explained as an award of restitutionary damages.[25] The dissenting judgment of Deane J in Hospital Products Ltd v United States Surgical Corporation[26] also provides support for a gain-stripping remedy for a breach of contract, although his Honour spoke in terms of the defendant having to ‘account, as a constructive trustee, for any profits’ made, rather than having to pay restitutionary damages.[27]

In Blake, the defendant was a former member of the Secret Intelligence Service who divulged information in breach of his contract of employment. The Court of Appeal, albeit in obiter dicta, responded by confirming the availability of restitutionary damages for breach of contract. Lord Woolf MR (delivering the judgment of the Court) began by referring to the academic and judicial support for restitutionary damages for breach of contract, commenting that ‘if the court is unable to award restitutionary damages for breach of contract, then the law of contract is seriously defective.’[28] In his Lordship’s opinion, ‘the difficult question is not whether restitutionary damages should ever be available for breach of contract, but in what circumstances they should be available.’[29]

Lord Woolf MR said that while an award of restitutionary damages for breach of contract should remain exceptional, there are ‘at least two situations in which justice requires the award of restitutionary damages where compensatory damages would be inadequate.’[30] The first is the case of ‘skimped performance’, namely where the defendant fails to provide the full extent of the services which they have contracted to provide and for which they have charged the plaintiff.[31] The second is where the defendant has obtained their profit by doing the very thing which they have contracted not to do.[32] The defendant’s breach in the case before his Lordship fell within this second category — the defendant had promised not to disclose official information and then did so for profit.

Lord Woolf MR concluded by explaining:

The two [situations in which justice requires the award of restitutionary damages] have this in common: that in both the profits in question are occasioned directly by the breach, which do not merely provide the defendant with the opportunity to make them; and in both compensatory damages are an inadequate remedy if regard is paid to the objects which the plaintiff sought to achieve by the contract.[33]

In Blake, a majority of the House of Lords dismissed the appeal from this decision of the Court of Appeal.[34] Unfortunately, the majority did not provide any clear guidance as to when a gain-stripping remedy would be available in breach of contract cases,[35] but Lord Nicholls, with whom Lord Goff and Lord Browne-Wilkinson agreed, held that the approach advocated by Lord Woolf MR in the Court of Appeal should be rejected, along with many of the academic theories.[36]

Of the majority, Lord Nicholls delivered the leading judgment.[37] In dismissing the appeal, his Lordship explained: ‘My conclusion is that there seems to be no reason, in principle, why the court must in all circumstances rule out an account of profit as a remedy for breach of contract. I prefer to avoid the unhappy expression “restitutionary damages”.’[38] This is important, because in discarding the label of restitutionary damages in favour of an account of profits, the House of Lords has taken the step advocated in this article.[39] However, their Lordships did not take the opportunity to discuss the reasons for, and the implications of, this development in the law. This article attempts to address those matters.

C Restitutionary Damages for a Tort or a Breach of Contract in the
Academic Literature

There is a vast body of academic literature concerning the availability of restitutionary damages for wrongs, particularly common law wrongs. What follows is necessarily limited to a brief summary of some of the major theories and criticisms of those theories.

At one extreme of the spectrum of academic views is that of Jones, namely that restitutionary damages should be available in tort and breach of contract cases whenever it is possible to show that there would have been no gain ‘but for’ the tort or breach of contract.[40] This general availability of restitutionary damages is not supported by the case law.

Other academics have suggested a more limited availability of restitutionary damages. Jackman,[41] for example, argues that restitutionary damages should be limited to cases involving the protection of what he refers to as ‘facilitative institutions’, namely private property, relationships of trust and confidence,[42] and occasionally contracts.[43] Although Jackman’s thesis does explain, or is at least consistent with, the majority of the leading cases, it has been criticised as being both inflexible and largely descriptive, rather than prescriptive.[44]

Birks has suggested that restitutionary damages should be available where there is a need for a ‘prophylactic intervention’,[45] or the wrong was committed ‘cynically’ in the sense of being calculated to make a profit.[46] The ‘prophylactic intervention’ rationale for an award of restitutionary damages is similar to Jackman’s notion of facilitative institutions and would not explain the availability of restitutionary damages in breach of contract and tort cases. The cynical breach theory has been criticised both as giving unwarranted prominence to the moral quality of the defendant’s wrong and as being uncertain in its application.[47]

Beatson, by comparison, has suggested that restitutionary damages should be available where specific performance (or an injunction) would be available.[48] His justification for this is that he views restitution as a monetised form of specific performance which should accordingly be governed by similar rules to those which govern the availability of specific performance. However, it is not obvious why either the restrictions upon the availability of specific performance or the different restrictions upon the availability of an injunction should determine the availability of restitutionary damages.[49] As Steyn LJ observed in Surrey, ‘[w]hy should the availability of a restitutionary remedy, as a matter of legal entitlement, be dependent on the availability of the wholly different and discretionary remedies of injunction and specific performance?’[50]

Although this approach to restitutionary damages is difficult to justify, interestingly it would link the availability of restitutionary damages to the discretionary considerations associated with an award of specific performance or an injunction. Such discretionary considerations are customarily associated with equitable remedies rather than common law remedies.

A similar theory as to the availability of restitutionary damages is that of Maddaugh and McCamus, who suggest that restitutionary damages should be available where compensatory damages are inadequate.[51] The ‘inadequacy of common law damages’ criterion for the availability of a gain-stripping remedy featured in the judgments in the Court of Appeal[52] and the House of Lords[53] in Blake, and is consistent with the account of profits approach suggested later in this article. However, the ‘inadequacy of common law damages’ criterion can be criticised because it is unclear as to why the availability of one remedy should depend on the inadequacy of another remedy, and because ‘inadequacy’ is a vague and uncertain term. These criticisms will be addressed below in the context of our discussion of the availability of an account of profits.[54]

IV THE TRUE NATURE OF THE GAIN-STRIPPING REMEDY

Assuming that the law should respond to the general demand for the availability of a gain-stripping remedy in at least some instances of tort or breach of contract, the question arises as to how the law should respond to this demand. It has been assumed, to date, that the appropriate response is through an award of restitutionary damages, a ‘new’ form of common law damages. In our view, the reliance upon this ‘new’ form of damages is not only confusing and difficult to reconcile with the traditional notion of common law damages, but also unnecessary. There is no reason in principle why the equitable remedy of an account of profits is incapable of responding to this demand. Indeed, established doctrine suggests that it should be available in appropriate cases.

V ACCOUNT OF PROFITS

A The Nature of an Account of Profits

From at least the 13th century, there was a common law action of account. However, as a consequence of the elaborate technicality of the action and the lengthy and cumbrous nature of the associated procedure, it fell into disuse and was superseded by the more flexible equitable remedy of account by the mid-18th century.[55]

The equitable remedy of account was defined by Windeyer J in Colbeam[56] as involving both:

The first element is technical — a specific relief, namely the taking of an account in an exact or precise way to establish what is owing. The second element is gain-stripping or restitutionary — a monetary relief, namely the payment of what, in conscience, belongs to the other.[57] The remedy of account is personal against the party liable to account.[58]

An account of profits requires that the defendant account for the entire profit made ‘by reason of’ the wrong in question.[59] That is, the wrong must be the factual cause of the profit. In addition to this limit upon the remedy of account, it has been argued that, in the case of innocent wrongdoers, the account should also be limited to a fair proportion of the profits made by the wrong in order to take into account, for example, the skill and effort expended by the defendant in making the profit.[60]

It has been held that the plaintiff cannot recover both damages and an account of profits.[61] However, the justification for this restriction is unclear. Although one might argue that an award of damages will in some cases remove the basis for an exercise of the equitable discretion to grant an account of profits, the recovery of damages should not be an absolute bar to an account of profits other than where the combination of an account and damages would be inconsistent or result in double recovery.[62]

B The Availability of an Account of Profits

The scope of application of the remedy has never been definitively stated. Whilst its principal application has been in the area of the equitable wrongs of breach of fiduciary obligations and obligations of confidence, the remedy has also been available in response to common law wrongs. However, the Chancery courts refused to state definitively when the remedy would and would not be available in relation to common law wrongs. For example, in North Eastern Railway Company v Martin, Lord Cottenham LC said that it was ‘impossible with precision to lay down rules or establish definitions as to the cases in which it may be proper for this Court to exercise this jurisdiction.’[63] The Chancery courts did, however, suggest that the equitable remedy would not be available in respect of common law wrongs in circumstances where the case could be disposed of as fully and conveniently by a court of common law.[64]

The texts identify seven situations where account has been successfully prayed in aid of a legal cause of action.[65] Many of the examples given are old-fashioned and/or have been superseded by legislation. They are as follows:[66]

  1. Where a defendant has committed legal waste, and the plaintiff also claims an injunction.
  2. Where the court orders general administration of a dissolved partnership.[67]
  3. Where there are mutual accounts, involving receipts and payments on both sides.
  4. Where, although the right relied on by the plaintiff was legal, the parties stood in a quasi-fiduciary relationship or a relationship of confidence. Examples include parties in a principal–agent relationship or employer–employee relationship.[68]
  5. Where the claim for damages at law is too complex to settle at law.[69]
  6. Where a party would have had a right to be paid moneys by another party if only the defendant had not prevented the right accruing. Here, an account is ordered to prevent the plaintiff’s rights being aborted.[70]
  7. Where a party infringes the intellectual property rights of another, by passing off or the infringement of a patent, copyright or trademark. Although Chancery would only order an account in an intellectual property case if it were sought with an injunction, it is now clear that in at least some situations an account of profits will be available in intellectual property cases, even though an injunction would not be available.[71] Today, the remedy of an account of profits is a statutory right in the case of infringement of a patent,[72] trademark[73] and copyright.[74]

Although it is not suggested that these categories are closed,[75] there has been little discussion of the potential availability of an account of profits for common law wrongs outside of these categories of case.

There appears nothing in principle or policy to prevent an expanded operation of the remedy of account. It has been suggested, for example, that aside from the absence of precedent it is difficult to identify why an account of profits has been excluded as a remedy for breach of contract.[76] Davidson argues:

Given that an order for account may be made in any division of the State Supreme Courts and in the Federal and High Courts, the remedy of taking accounts is likely to be available to assist in the aid of a common law right in situations outside the specific examples noted above where necessary to assist the enforcement of a common law right.[77]

We suggest that an account of profits, like the equitable remedy of specific performance, should be available as a remedy for common law wrongs wherever the legal remedies available to the plaintiff, and in particular common law damages, are inadequate.[78] This availability of an account of profits would involve nothing more than recognition of the ability of equity, through its auxiliary jurisdiction, to assist in the enforcement of common law rights. In our model, the inadequacy of common law damages is merely the trigger for the court’s exercise of this auxiliary jurisdiction in equity.

We referred earlier in this article to two criticisms of employing the inadequacy of common law damages as the criterion for the availability of a gain-stripping remedy, namely that it is unclear why the availability of one remedy should turn upon the inadequacy of another, and the vague and uncertain nature of the concept of inadequacy.

As to the first criticism, if the gain-stripping remedy is an account of profits, rather than restitutionary damages, then it is a criticism of the relationship between the common law and equity (or more precisely, of the trigger for the court’s exercise of its auxiliary jurisdiction in equity) rather than a criticism of the criterion for the availability of a gain-stripping remedy. Recently, in the context of the equitable remedy of specific performance, it has been suggested that it should not be necessary to address as a threshold question the inadequacy of the available legal remedies.[79] Rather, the equitable remedy of specific performance should be available, in equity’s auxiliary jurisdiction, whenever it would be a more just or appropriate remedy than the available legal remedy or remedies.[80] If this more expansive approach to the auxiliary jurisdiction of equity were adopted, then it would follow that an account of profits, like specific performance, would be available to assist in the enforcement of common law rights whenever an account of profits were a more appropriate remedy than common law damages. In Blake, Lord Nicholls went very close to adopting this general approach, stating that the discretionary remedy of an account of profits should be available where it is ‘the most appropriate remedy for breach of contract’[81] or where it is ‘just and equitable that the defendant should retain no benefit from his breach of contract’.[82]

As to the second criticism, we acknowledge that ‘the inadequacy of damages’ (and ‘whether an account of profits is more appropriate than common law damages’) is, taken in the abstract, an uncertain criterion for the availability of an account of profits. However, it is important to recognise that the inadequacy of damages is merely the beginning of the inquiry which must be undertaken through the case law. As has happened in relation to the remedy of specific performance, the law will develop over time to a stage where there are acceptably settled principles governing the categories of case in which an account of profits should be available in the auxiliary jurisdiction of the court. Indeed, in the area of torts, that process has already commenced through the cases discussed earlier in this article. In the area of contract, that process began with Lord Woolf MR’s identification in Blake of two categories of case in which he regarded common law damages as inadequate, thereby justifying a gain-stripping remedy. Lord Woolf MR then received a set-back, however, when the House of Lords abandoned these two categories. Although Lord Steyn identified four features which, in combination, would justify an account of profits,[83] Lord Nicholls did no more than provide a ‘general guide’.[84] It may be that the considerations identified and discussed in the body of academic literature (referred to above) in relation to the availability of restitutionary damages will guide the courts in identifying and refining the categories of case in which the inadequacy of common law damages justifies the availability of an account of profits.

Again, the identification of the considerations relevant to the availability of an account of profits, and their relative importance, is beyond the scope of this article. The point made here is simply that the remedy of an account of profits is perfectly capable of responding to the remedial demand which has led to the recent support for restitutionary damages.

VI ABANDONING THE TERM ‘RESTITUTIONARY DAMAGES’

A Justifications for Retaining the Term ‘Restitutionary Damages’

Although the reasons for retaining restitutionary damages as a gain-stripping remedy available in respect of common law wrongs have never been clearly articulated, there are some potential justifications worthy of detailed analysis.

In justifying the existence of this new form of common law damages, it might be argued that it is wrong to assume that common law damages are limited to compensation. The argument would be that common law damages already include awards which are non-compensatory, such that the term ‘damages’ in the common law is nothing more than a synonym for a monetary award in favour of a successful plaintiff.[85] On this view, restitutionary damages would sit comfortably within the common law notion of damages, and would not represent a fundamental shift away from any compensatory norm of common law damages.

The obvious examples of non-compensatory common law damages are nominal damages and exemplary damages. However, upon closer examination, both nominal damages and exemplary damages are better viewed as limited exceptions to the compensatory hegemony of common law damages, rather than as undermining that hegemony and hence supporting an award of restitutionary damages.

‘Nominal damages’ refers to the award that a plaintiff receives if he or she proves the existence of a common law wrong, such as a tort, without proving any loss. Two reasons are given for the existence of nominal damages. The first is that, given the general rule that costs follow the event, an award of nominal damages will allow a plaintiff who has made out a wrong to recover their costs. However, this is only a general rule and the court retains a discretion to deprive a successful plaintiff of their costs where, for example, the plaintiff had no good reasons for suing.[86] For example, in Anglo-Cyprian Agencies Ltd v Paphos Industries Ltd, Lord Devlin held that a plaintiff who recovered merely nominal damages should not necessarily be regarded as ‘successful’ in the ordinary sense of the word. [87]

The second reason for an award of nominal damages is that it constitutes a declaration of legal rights.[88] Frequently, these actions were brought with regard to property rights. Most cases falling within this category are notable mainly for their age. The reason for this is that today there are more direct means available to a plaintiff for achieving this end, namely the court’s broad jurisdiction to award declarations (and injunctions).[89]

Given the likelihood of courts exercising their discretion as to costs against a plaintiff who obtains only nominal damages, and the wide-ranging jurisdiction of the court to award declarations, Burrows’ observation that ‘nominal damages are superfluous and could happily be abolished’ must be correct.[90] The theoretical availability of nominal damages does little to undermine the compensatory hegemony of the common law and hence provides a poor justification for an award of restitutionary damages.

Exemplary damages are damages whose purpose is to punish the defendant for his or her wrongful conduct. They are intended to have a deterrent effect and are obviously not compensatory in nature. Exemplary damages are not awarded in contract cases,[91] but they are available in tort cases.[92] In Lamb v Cotogno,[93] the High Court held that an award of exemplary damages was appropriate where the defendant’s conduct involved ‘fraud, malice, violence, cruelty, insolence or the like’, or the defendant acts in ‘contumelious disregard of the plaintiff’s rights’.[94] In England, the decision in Rooks v Barnard[95] has dramatically limited the scope of the award of exemplary damages, but that limitation has not been applied in Australia. That said, the continued use of exemplary damages has been questioned[96] and the award must be considered a limited exception to the general rule that damages are concerned with compensation. Again, the potential availability of exemplary damages does little to undermine the common law’s focus upon compensation and hence justify an award of restitutionary damages.

A related justification for retaining the term restitutionary damages might be a desire to rethink or challenge the compensatory hegemony of common law damages. Although one cannot ignore the ability of the common law to develop in order to deal with its inadequacies, one must question the need to alter the traditional concept of common law damages drastically when the equitable remedy of account is available and perfectly capable of responding to this inadequacy of the common law. The use of the existing equitable remedy of account also has the virtue of allowing the law to draw on the body of case law which has been developed over a number of years so as to define, and govern the operation and scope of, that remedy. There is no such body of case law in relation to restitutionary damages.

Another justification for retaining the term restitutionary damages, and implicitly rejecting or restricting the equitable remedy of account’s role in this area, might be a desire to avoid the debate concerning the relationship between the common law and equity. However, aside from not being particularly helpful or useful,[97] this justification ignores the benefits that may flow from discussion of the relationship between the common law and equity in both this and other areas of the law. That discussion may, for example, inform the debate as to the availability of specific performance for breach of contract.[98] It would also play an important role in clarifying the law’s approach to remedies generally.[99]

A further justification for turning to restitutionary damages, rather than an account of profits, might be the perception held by some that an account of profits requires a very precise calculation of the relevant profits (with an actual account having to be drawn up, showing gains and losses),[100] whereas common law damages are able to be calculated in a more rough and ready manner. However, there has been recent support for a more rough and ready approach to an account of profits. For example, in My Kinda Town Ltd v Soll, Slade J said:

[T]he general intention of the Court in making the order ... has been to achieve a fair apportionment, so that neither party will have what justly belongs to the other. What will be required on the inquiry, if it has to be pursued, will not be mathematical exactness but only a reasonable approximation.[101]

In Blake, Lord Nicholls held likewise, commenting that ‘[d]espite the niceties and formalities once associated with taking an account, the amount payable under an account of profits need not be any more elaborately or precisely calculated than damages.’[102] In light of this recognition of equity’s ability, where appropriate, to take a rough and ready approach akin to that of the common law approach to damages, it is suggested that this potential justification for restitutionary damages should also be afforded little, if any, weight.

In any event, this ‘justification’ is, in reality, nothing more than a conceivable difference between the operation of an account of profits and restitutionary damages. Whilst such a difference (if it were one of substance) might explain why a plaintiff would seek restitutionary damages, rather than an account of profits, and hence why there might be pressure on the law to retain restitutionary damages as a separate remedy, we suggest that it is dangerous to view it as a justification for the existence of restitutionary damages. Similarly, we would not elevate to the status of potential justifications the differences between restitutionary damages and an account of profits discussed later in this article.[103] Rather, they are, at most, possible explanations for the retention of restitutionary damages.

A final justification for the use of the term restitutionary damages might be that if the availability of restitutionary damages for common law wrongs were founded upon the existence of a cause of action for unjust enrichment, then perhaps the label restitutionary damages would be appropriate, in that it would highlight the remedy’s link to its doctrinal foundation in the law of unjust enrichment. However, for the reasons discussed below, it is doubtful whether any such link exists or justifies retention of the restitutionary damages label. If anything, retention of that label is likely to confuse, rather than clarify or inform the debate.

B Justifications for Abandoning the Term ‘Restitutionary Damages’

Both the ‘restitutionary’ and ‘damages’ aspects of the term used to describe the remedy which is the subject of this article have been criticised. We will address each in turn.

In order to understand the criticisms of the use of the term ‘restitutionary’, and in particular the difficulties with the suggestion that the remedy is founded in the law of unjust enrichment, it is necessary to take a brief diversion into the area of law referred to by restitution law scholars as ‘restitution for wrongs’.

In explaining the availability of restitutionary remedies for wrongs, restitution scholars distinguish analytically between ‘autonomous unjust enrichment’ and ‘unjust enrichment by wrongs’.

The former comprises ‘unjust enrichment by subtraction’ (where the defendant’s gain is matched by the plaintiff’s loss) and is concerned with factors (referred to as ‘unjust factors’) other than wrongs, which invalidate a direct transfer or shift of wealth from the plaintiff to the defendant.[104] To succeed in a claim based upon autonomous unjust enrichment, a plaintiff must establish:

  1. that the defendant was enriched;
  2. that that enrichment was ‘at the expense’ of the plaintiff (in other words, that there has been a transfer of wealth from the plaintiff to the defendant);
  3. an unjust factor (for example, mistake or undue pressure); and
  4. the absence of any defence.

Upon satisfaction of these four elements, a plaintiff is entitled to restitution — that is, restoration to the plaintiff of the defendant’s enrichment.

However, in order to succeed in a claim based upon unjust enrichment through wrongdoing, both the ‘unjust’ and ‘at the expense of the plaintiff’ requirements are met by establishing an independent wrong such as a tort or breach of contract. There is no need to establish a transfer of wealth from the plaintiff to the defendant in order to establish an entitlement to restitutionary damages in the area of unjust enrichment by wrongs.

Some have argued that the remedy in the wrongs cases (as opposed to the autonomous unjust enrichment cases) is inappropriately named ‘restitutionary damages’, and prefer to call it ‘disgorgement damages’.[105] Two related reasons are cited in favour of abandoning the restitutionary damages label. The first and most fundamental is that the remedy is not founded upon a cause of action for unjust enrichment. The justifications for this view include the difficulty in making out the requirement that the defendant’s gain be ‘at the expense’ of the plaintiff in those cases of wrongs which do not involve a transfer of wealth from the plaintiff to the defendant, and the absence of any unjust enrichment reasoning in the cases which have involved awards of restitutionary damages.[106] The argument is that to refer to the gain-stripping remedy available for wrongs as restitutionary damages leads to confusion with cases involving restitution for autonomous unjust enrichment, when the wrongs cases are at least analytically distinct from the autonomous unjust enrichment cases and may in fact have no unjust enrichment foundation at all.

The second reason suggested for abandoning the label ‘restitutionary damages’ in favour of ‘disgorgement damages’ is that the measure of the remedies awarded in the wrongs cases differs from that awarded in the autonomous unjust enrichment cases. The remedy in the former is the total of the defendant’s gain, whereas the remedy in the latter is limited to the transfer of wealth from the plaintiff to the defendant.[107] Not only does this difference in measure suggest the remedies should have different names, but also that ‘restitution’ or ‘restitutionary damages’ is more linguistically appropriate in the autonomous unjust enrichment cases than it is in the wrongs cases. In the autonomous unjust enrichment cases, a defendant is required to reverse a transfer of wealth, or restore an enrichment subtracted from the plaintiff to the plaintiff, and the remedy is aptly described as restitution or restitutionary damages. In the wrongs cases, the defendant is required to surrender their gain to the plaintiff. As the gain may not have resulted from a transfer of wealth from the plaintiff, it is linguistically confusing to refer to the remedy in wrongs cases as being restorative or restitutionary in nature. Rather, it involves merely the confiscation or disgorgement of the gain from the defendant.

For these reasons, Worthington and Smith, for example, prefer the term ‘disgorgement damages’.[108] Whilst we largely agree with their reasons for abandoning the label of ‘restitutionary damages’, the criticisms we make below of the inclusion of a gain-stripping remedy within the common law concept of damages would apply with equal force to the label of ‘disgorgement damages’.

Edelman[109] has suggested a refinement of the Worthington and Smith analysis. After a lengthy examination of the case law, Edelman concludes that the restitution for wrongs cases in fact involve two remedies of different measure.[110] In some cases, the remedy is limited to that portion of the defendant’s gain which is matched by an extraction of wealth from the plaintiff (for example, through the defendant’s use of the plaintiff’s property). Edelman argues that in these cases the remedy is properly referred to as restitutionary damages.[111] In other cases, the remedy is not limited in this way, but extends to recovery of the defendant’s entire gain, regardless of any extraction from the plaintiff. Edelman would limit the use of disgorgement damages to this remedy.[112]

We prefer to express no conclusive view as to the availability of the lesser measure remedy referred to by Edelman. Whilst there is support in the case law for this lesser measure remedy, it may be that the explanation for its existence lies more in judges’ attempts to remain as faithful to the traditionally compensatory approach of the common law as possible, rather than any conscious decision to recognise a more limited gain-based remedy. However, as Edelman concedes, it is difficult to reconcile even this more limited gain-based remedy with the notion of compensatory damages.[113] For that reason, if this lesser measure remedy were to remain part of the law, we would prefer to see the remedy referred to simply as ‘restitution’ or perhaps ‘monetary restitution’, and not ‘restitutionary damages’.

We turn now to those criticisms which focus upon the ‘damages’ aspect of the restitutionary damages label. McGregor, for example, has been a strong critic of the inclusion of this gain-stripping remedy within the common law concept of damages. He argues that gain-stripping (or restitution) and damages are generally two separate concepts.

McGregor explains:

In my lexicon there is ‘restitution’ and there is ‘damages’. I do not say that never the twain shall meet for they meet, and overlap, all the time. But they are entirely different concepts: one deals with assuring compensation for loss to a plaintiff, the other with extracting a benefit from a defendant. Damages should be restricted to compensation for loss. That is what damages are about — damages for damage in our law, for damnum in Roman law, for dommage or dommage-interêts in French law. Restitutionary damages are not concerned with compensation for loss.[114]

Certainly, one must accept that the label ‘restitutionary damages’, if not internally inconsistent, is, at the very least, linguistically confusing. An account of profits, on the other hand, is linguistically accurate. Its name indicates what the remedy involves, namely that it requires the defendant to surrender or account for the profit that they have made in breach of the relevant obligation.

It is difficult to deny the compensatory hegemony of common law damages. Not only does McGregor define damages as being limited to pecuniary compensation,[115] but also the High Court of Australia appears to accept a compensatory hegemony. For example, in the decision of Haines v Bendall, Mason CJ, Dawson, Toohey and Gaudron JJ said:

The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed ... Compensation is the cardinal concept. It is the ‘one principle that is absolutely firm, and which must control all else’ ... Cognate with this concept is the rule, described by Lord Reid in Parry v Cleaver, as universal, that a plaintiff cannot recover more than he or she has lost.[116]

C Conclusion

In our view, the criticisms outlined above of both the ‘restitutionary’ and ‘damages’ aspects of the term ‘restitutionary damages’ are well made. For this reason, it is not sufficient, as some writers have suggested, that restitutionary damages be replaced with disgorgement damages. The remedy forms no part of common law damages and its name should reflect this fact. To the extent to which the remedy is available in response to common law wrongs, it is better viewed as an award of the equitable remedy of account of profits.

VII CONSEQUENCES OF THE REMEDY BEING AN ACCOUNT OF PROFITS

A Doctrinal Consequences

The primary difference between restitutionary damages and an account of profits is that the former is a common law remedy and hence available as of right,[117] whereas the latter is an equitable remedy and hence discretionary.[118] It follows that an important consequence of accepting that an account of profits should be available in respect of common law wrongs, and that there is no place in the law for restitutionary damages, is that the gain-stripping remedy for common law wrongs will be discretionary, rather than available as of right.

It is suggested, however, that the discretionary nature of equitable remedies tends to be overstated. The existence of a discretion does not allow judges employing equitable remedies to act without restraint. Rather, the discretion to award equitable remedies must be exercised judicially,[119] that is, having regard to the relevant principles and considerations identified in the case law.

It is instructive to examine the availability of the equitable remedy of specific performance for breach of contract. Over time, the law has developed rules as to the availability of this remedy in particular categories of case. For example, in the area of contracts for the sale of land, Sir Garfield Barwick, sitting in the Privy Council, said that ‘once the contract is seen as a contract for the purchase of land on stated terms, the case for specific performance is unanswerable.’[120] In addition, it has recently been said that ‘[i]n the domain of contract, specific performance has come the closest ... to being seen as a remedy of right, rather than discretion, when the disposition of an interest in land is involved.’[121]

Nevertheless, recognition of the equitable nature of the remedy does mean that its availability will be subject to the discretionary considerations and equitable defences which govern the availability of other equitable remedies (for example, laches and acquiescence). These considerations have no role in relation to common law damages.

Tilbury has suggested three reasons why, in practice, the distinction between common law and equitable remedies matters.[122]

The first is that the technique of equity differs from that of common law. Tilbury argues that this difference arises because equity claims to perceive parties in context, and to deal with particularised justice.[123] Spry supports the notion that this distinction exists.[124] In this context, it is frequently observed that the doctrine of precedent at common law operates differently from its equivalent in equity.[125]

Although there are differences between the techniques of equity and common law, there is a general tendency to exaggerate these differences. There is a tendency both to overstate the flexibility and discretion of equity (discussed above) and to understate the ability of common law to develop over time, and respond to the justice of an individual case. For example, both McHugh J (extra-curially)[126] and Gummow J[127] have recently expressed views as to judicial method, and in so doing did not distinguish between legal and equitable doctrine.

The second matter raised by Tilbury is that equity may take into account the position of third parties, whereas the common law will not.[128] Again, the practical impact of this difference will be little, if any. While a third party’s position is often likely to be affected by an equitable remedy such as an injunction,[129] it is difficult to imagine, for example, a case where the position of a third party would be affected by an award of damages. Whether the gain-stripping remedy discussed in this article is common law based, and hence perhaps less responsive to third party interests than it would be if it were equitable, is likely to be of little practical significance.

The third matter referred to by Tilbury is that equitable relief can be given upon terms, whereas common law relief is not so flexible.[130] Again, however, there is no clear dichotomy in practice. Indeed, as Tilbury acknowledges, ‘[i]n truth, there is no reason why awards at law should not, where appropriate, be made on terms. Here, as in other proper contexts, the rules of law and of equity ought to coalesce.’[131]

In summary, though there are, and will continue to be, doctrinal differences which will flow from the distinction between common law and equitable remedies, and hence from the classification of gain-stripping remedies as an account of profits, as opposed to restitutionary damages, one must be careful not to overstate the practical effect of these differences.

B Practical Consequences

A number of practical, rather than doctrinal, consequences may flow from the abandonment of restitutionary damages and/or the recognition of the availability of an account of profits in respect of common law wrongs.

One possible result is that there may be statutes whose operation will turn upon, or at least be affected by, the existence of a claim for damages.[132] For example, the Bankruptcy Act 1966 (Cth) s 82 limits the ability of a person with a claim for unliquidated damages to prove bankruptcy in the bankrupt’s administration. This provision is less likely to restrict the ability of a person with a claim for an account of profits to prove bankruptcy in the administration than it would a plaintiff with a claim for restitutionary damages.

Framing the gain-stripping relief as an account of profits, rather than restitutionary damages, may also be determinative of whether a particular insurance policy will respond to the defendant’s liability. If an indemnity insurance policy is expressed as covering a defendant for any liability in damages to third parties, one would expect the policy to cover a defendant’s liability to pay restitutionary damages. However, the insurer may well argue the policy should not and/or does not respond to any liability on the part of the defendant to account for any profits made through his or her wrongdoing.

There may well be a number of other practical ramifications which would flow from recognition that the gain-stripping remedy available in respect of common law wrongs is an account of profits, rather than restitutionary damages. The point is that the choice between restitutionary damages and an account of profits is a significant one, and will have substantive doctrinal and practical consequences upon the gain-stripping remedy available in respect of common law wrongs.

VIII CONCLUSION

The gain-stripping remedy which is and should be available to victims of common law wrongs in appropriate cases is better viewed as an equitable account of profits than as common law restitutionary damages. The latter is a relatively recent and unnecessary invention which is linguistically confusing and difficult to reconcile with the compensatory norm of the common law. On the other hand, there is no reason in principle why the linguistically accurate equitable remedy of account of profits should not be available in appropriate cases of common law wrongdoing.

The choice between an account of profits and restitutionary damages is one with important consequences. Recognition of the equitable character of the gain-stripping remedy should assist courts in determining which cases are appropriate for such an award. It will also have a number of doctrinal and practical consequences, some of which have been touched upon above.


[*] BCom, LLB (Hons) (Adel), BCL (Oxon); Solicitor of the Supreme Court of South Australia.

[†] BEc, LLB (Hons) (Syd), LLM (UBC); Senior Lecturer, Faculty of Law, The University of Adelaide.

[1] See, eg, Peter Birks, ‘Restitutionary Damages for Breach of Contract: Snepp and the Fusion of Law and Equity’ [1987] Lloyd’s Maritime and Commercial Law Quarterly 421.

[2] The classic article first recognising the compensatory hegemony of common law damages was Charles Wright, ‘The Law of Remedies as a Social Institution’ (1955) 18 University of Detroit Law Journal 376.

[3] As is explained later in this article (see below Part VI), some writers have criticised the use of the label ‘restitutionary’ in this context on the basis that, unlike the pure gain-stripping remedy which is the subject of this article, a restitutionary remedy is concerned only to strip a defendant of that portion of their gain which represents a transfer of wealth from the plaintiff.

[4] [1968] HCA 50; (1970) 122 CLR 25, 32 (‘Colbeam’).

[5] In A-G (UK) v Times Newspaper Ltd (No 2) [1990] 1 AC 109, 286, Lord Goff remarked that the maxim that a person not be allowed to profit from their wrong ‘is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case.’

[6] Hereafter, all references to a gain-stripping or restitutionary remedy are to one which is personal and monetary in nature. This article does not address the availability of gain-stripping or restitutionary remedies which are proprietary or non-monetary in nature.

[7] See below Part VI(A).

[8] See, eg, Siddell v Vickers (1892) 9 RPC 152 (infringement of a patent); Potton Ltd v Yorkclose Ltd [1990] 17 FSR 11 (breach of copyright); Slazenger & Sons v Spalding & Brothers [1909] UKLawRpCh 146; [1910] 1 Ch 257 (infringement of a trademark); My Kinda Town Ltd v Soll [1982] 8 FSR 147 (passing off); A-G (UK) v Times Newspaper Ltd (No 2) [1990] 1 AC 109 (breach of confidence).

[9] Phillips v Homfray [1883] UKLawRpCh 173; (1883) 24 Ch D 439, 455 (Pearson J).

[10] And have been so viewed in the academic literature. See also the ‘waiver of tort’ cases, which include Phillips v Homfray [1883] UKLawRpCh 173; (1883) 24 Ch D 439; Oughton v Seppings [1830] EngR 134; (1830) 1 B & Ad 241; 109 ER 776 and Powell v Rees [1837] EngR 994; (1837) 7 Ad & El 426; 112 ER 530. These cases involved plaintiffs with actions in both tort and autonomous unjust enrichment (explained later), but where the plaintiffs ignored the tort and instead claimed the restitutionary remedy flowing from the unjust enrichment: Andrew Burrows, Remedies for Torts and Breach of Contract (2nd ed, 1994) 289, 290–3.

[11] [1952] 2 QB 246. This case has been followed in Australia in Yakamia Dairy Pty Ltd v Wood [1976] WAR 57, 58 (Jackson CJ) and Gaba Formwork Contractors Pty Ltd v Turner Corporation (1991) 32 NSWLR 175, 188 (Giles J). The former Australian case is discussed in John Glover, ‘Restitutionary Principles in Tort: Wrongful User of Property and the Exemplary Measure of Damages’ [1992] MonashULawRw 8; (1992) 18 Monash University Law Review 169, 176.

[12] Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246, 254–5.

[13] Ibid 252–3 (Somervell LJ), 256–8 (Romer LJ).

[14] See, eg, Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd’s Rep 395; Bracewell v Appleby [1975] Ch 408.

[15] [1993] 2 EGLR 102. See also Ministry of Defence v Thompson [1993] 2 EGLR 107.

[16] Ministry of Defence v Ashman [1993] 2 EGLR 102, 105.

[17] Burrows, above n 10, 306.

[18] See, eg, the refusal of a claim for restitutionary damages for the tort of nuisance by the English Court of Appeal in Stoke-on-Trent City Council v W & J Wass Ltd [1988] 3 All ER 394, 402 (Nourse LJ).

[19] [1997] EWCA Civ 3008; [1998] 1 All ER 833 (‘Blake’).

[20] [2000] UKHL 45; [2000] 4 All ER 385.

[21] It is important to note, however, that many breach of contract cases also involve autonomous unjust enrichment and hence enable a plaintiff to obtain a restitutionary remedy. As it is the unjust enrichment, rather than the breach of contract, which gives rise to a restitutionary remedy in those cases, they are not authority for an award of restitutionary damages for breach of contract.

[22] [1977] Ch 106, 332 (Megarry V-C).

[23] [1993] EWCA Civ 7; [1993] 3 All ER 705 (‘Surrey’).

[24] [1974] 2 All ER 321.

[25] See, eg, Burrows, above n 10, 313, who explains that the case is closely analogous to the proprietary torts cases discussed above. Subsequently, in Surrey [1993] EWCA Civ 7; [1993] 3 All ER 705, 715, Steyn LJ justified the restitutionary nature of the award in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 2 All ER 321 by reference to the proprietary reasoning in that case.

[26] [1984] HCA 64; (1984) 156 CLR 41.

[27] Ibid 124.

[28] Blake [1997] EWCA Civ 3008; [1998] 1 All ER 833, 845.

[29] Ibid.

[30] Ibid.

[31] Ibid, citing City of New Orleans v Firemen’s Charitable Association, 9 So 486 (1891) as an example.

[32] Blake [1997] EWCA Civ 3008; [1998] 1 All ER 833, 846.

[33] Ibid.

[34] [2000] UKHL 45; [2000] 4 All ER 385, 401 (Lord Nicholls; Lord Goff and Lord Browne-Wilkinson agreeing), 405 (Lord Steyn), 411 (Lord Hobhouse dissenting).

[35] A common feature of both majority judgments was that a plaintiff must have a ‘legitimate’ or ‘special’ interest in seeking a gain-stripping remedy in order to obtain one: ibid 398 (Lord Nicholls), 403 (Lord Steyn). As Lord Steyn stated, the availability of a gain-stripping remedy following a breach of contract is ‘best hammered out on the anvil of concrete cases’: at 403.

[36] Ibid 398.

[37] The other majority judgment was delivered by Lord Steyn. This judgment is of particular note, since Lord Steyn gave an important and apparently inconsistent judgment in Surrey [1993] EWCA Civ 7; [1993] 3 All ER 705.

[38] Blake [2000] UKHL 45; [2000] 4 All ER 385, 397 (emphasis in original).

[39] One commentator has pointed out that, at the hearing of the appeal, Lord Browne-Wilkinson openly questioned the ability of the term ‘restitutionary damages’ to accommodate situations generally covered by the term ‘account of profits’: James Edelman, ‘Restitutionary Damages and Disgorgement Damages for Breach of Contract’ [2000] Restitution Law Review 129, 132.

[40] Lord Goff and Gareth Jones, The Law of Restitution (5th ed, 1998) 781 (with respect to tort); Gareth Jones, ‘The Recovery of Benefits Gained from a Breach of Contract’ (1983) 99 Law Quarterly Review 443, 459.

[41] I M Jackman, ‘Restitution for Wrongs’ (1989) 48 Cambridge Law Review 302.

[42] This includes both the fiduciary obligation and the obligation of confidence.

[43] Jackman, above n 41, 318–21 argues that restitutionary damages should only be available in contract where the breach of the contract possesses a dual character so that there is also an infringement of private property or a relationship of trust.

[44] See, eg, Andrew Burrows and Ewan McKendrick, Cases and Materials on the Law of Restitution (1997) 573; Keith Mason and J W Carter, Restitution Law in Australia (1995) [1510].

[45] That is, where there is a breach of fiduciary duty.

[46] Peter Birks, An Introduction to the Law of Restitution (1985) 334; Peter Birks, Civil Wrongs: A New World (1991) 94–8; Birks, ‘Restitutionary Damages for Breach of Contract’, above n 1, 423.

[47] The Law Commission (Great Britain), Aggravated, Exemplary and Restitutionary Damages, Report No 247 (1997) [3.46]; Jack Beatson, The Use and Abuse of Unjust Enrichment: Essays on the Law of Restitution (1991) 15; Surrey [1993] EWCA Civ 7; [1993] 3 All ER 705, 715 (Steyn LJ); Blake [1997] EWCA Civ 3008; [1998] 1 All ER 833, 845 (Lord Woolf MR).

[48] Beatson, above n 47, 17.

[49] Burrows, above n 10, 311.

[50] [1993] EWCA Civ 7; [1993] 3 All ER 705, 715. See also at 713 (Dillon LJ).

[51] Peter Maddaugh and John McCamus, The Law of Restitution (1990) 436–8.

[52] [1997] EWCA Civ 3008; [1998] 1 All ER 833.

[53] [2000] UKHL 45; [2000] 4 All ER 385.

[54] See below Part V(B).

[55] R P Meagher, W M C Gummow and J R F Lehane, Equity: Doctrines and Remedies (3rd ed, 1992) 659–60; Ian Davidson, ‘Taking Accounts’ in Patrick Parkinson (ed), The Principles of Equity (1996) 880, 880.

[56] [1968] HCA 50; (1970) 122 CLR 25, 34, 38.

[57] Ibid 32.

[58] See, eg, Scott v Scott [1963] HCA 65; (1963) 109 CLR 649.

[59] Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373, 393 (Gibbs J); Colbeam [1968] HCA 50; (1970) 122 CLR 25, 37 (Windeyer J). For a detailed consideration of the extent of an account of profits and the calculation of the defendant’s profits, see Davidson, ‘Taking Accounts’, above n 55.

[60] See, eg, Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561–2 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

[61] Neilson v Betts [1871] UKLawRpHL 1; (1871) 5 LRHL 1, 22 (Lord Westbury); Colbeam [1968] HCA 50; (1970) 122 CLR 25, 32 (Windeyer J).

[62] Burrows, above n 10, 305.

[63] (1848) 2 Ph 758, 762; 41 ER 1136, 1138.

[64] Meagher, Gummow and Lehane, above n 55, 661–3; Davidson, ‘Taking Accounts’, above n 55, 885–6.

[65] Meagher, Gummow and Lehane, above n 55, 661–3; Davidson, ‘Taking Accounts’, above n 55, 885–6.

[66] Meagher, Gummow and Lehane, above n 55, 661–3.

[67] Lacey v Hill [1872] UKLawRpCh 131; (1872) 8 LR Ch App 441, 444 (James LJ).

[68] Mackenzie v Johnston [1819] EngR 536; (1819) 4 Madd 373, 375; [1819] EngR 536; 56 ER 742, 743 (Leach V-C); Padwick v Stanley [1852] EngR 692; (1852) 9 Hare 627, 628; [1852] EngR 692; 68 ER 664, 664 (Turner V-C).

[69] O’Connor v Spaight (1804) 1 Sch & Lef 305, 309; Taff Vale Railway Co v Nixon [1847] EngR 464; (1847) 1 HL Cas 111, 121; [1847] EngR 464; 9 ER 695, 699; Denmark Productions Ltd v Boscobel Productions Ltd [1969] 1 QB 699, 726–7.

[70] McIntosh v Great Western Railway Company [1864] EngR 804; (1850) 2 Mac & G 74, 91–5; [1864] EngR 804; 42 ER 29, 37–8; London, Chatham & Dover Railway Company v South Eastern Railway Company [1891] UKLawRpCh 168; [1892] 1 Ch 120, affirmed [1893] UKLawRpAC 41; [1893] AC 429 (CA).

[71] Colbeam [1968] HCA 50; (1970) 122 CLR 25, 31 (Windeyer J).

[72] Patents Act 1990 (Cth) s 122(1).

[73] Trade Marks Act 1995 (Cth) s 126(b).

[74] Copyright Act 1968 (Cth) s 115(2).

[75] Meagher, Gummow and Lehane, above n 55, 663.

[76] Wayne Covell and Keith Lupton, Principles of Remedies (1995) [6.17], citing Burrows, above n 10, 307–14; Mason and Carter, above n 44, [1510].

[77] Davidson, ‘Taking Accounts’, above n 55, 887. It should also be noted that Ian Davidson, through his influential article, ‘The Equitable Remedy of Compensation’ [1982] MelbULawRw 4; (1982) 13 Melbourne University Law Review 349, played an important role in revitalising another equitable monetary remedy.

[78] On one view, this is merely the converse of Chancery’s suggestion that an equitable account of profits would not be available in support of common law rights where the case could be disposed of properly by a court of common law.

[79] I C F Spry, The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages (5th ed, 1997) 60.

[80] Ibid. See also Grant Hammond, ‘Rethinking Remedies: The Changing Conception of the Relationship between Legal and Equitable Remedies’ in Jeffrey Berryman (ed), Remedies: Issues and Perspectives (1991) 87.

[81] [2000] UKHL 45; [2000] 4 All ER 385, 398.

[82] Ibid 397.

[83] Ibid 403.

[84] Ibid 398.

[85] See, eg, Judge W G Earengey, Mayne’s Treatise on Damages (11th ed, 1946) 1, where damages are defined as ‘the pecuniary satisfaction obtainable by success in an action.’ However, in Jabbour v Custodian of Israeli Absentee Property [1954] 1 All ER 145, 151, Pearson J referred to that broad definition of damages as taking the word ‘damages’ in a rather unusual sense. See also Harvey McGregor, McGregor on Damages (16th ed, 1997) [1].

[86] In Bank of Credit & Commerce International SA (in liq) v Ali (No 4) (1999) 149 NLJ Rep 1734, 1734, Lightman J held that the court could make a costs order different from the general rule if on the facts of the case justice so required.

[87] [1951] 1 All ER 873, 874.

[88] It is for this reason that Tilbury deals with nominal damages in the chapter entitled ‘Declaratory Relief’ in Michael Tilbury, Civil Remedies (1990) vol 1, [8001].

[89] McGregor, McGregor on Damages, above n 85, [427].

[90] Burrows, above n 10, 270.

[91] See, eg, Addis v Gramophone Co Ltd [1909] AC 488; Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78, 89; Whitfeld v De Lauret & Co Ltd [1920] HCA 75; (1920) 29 CLR 71, 80; Moss v Sun Alliance Australia Ltd (1990) 99 FLR 77.

[92] See, eg, XL Petroleum (NSW) Pty Ltd v Caltex Oil (Aust) Pty Ltd [1985] HCA 12; (1985) 155 CLR 448. Obviously, the exclusion of contract greatly reduces the ambit of operation of exemplary damages.

[93] [1987] HCA 47; (1987) 164 CLR 1.

[94] Ibid 8 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ). See also Trend Management Ltd v Borg (1996) 40 NSWLR 500, 502 (Kirby P).

[95] [1964] UKHL 1; [1964] AC 1129.

[96] See, eg, Burrows, above n 10, 282–5; Tilbury, above n 88, [5017]–[5020]. However, see also The Law Commission, above n 47, [5.29] where Burrows (as the Law Commissioner in charge of this report) recommends the retention of exemplary damages as fulfilling a discrete purpose.

[97] It also fuels the debate on the relationship between equity and restitution.

[98] This argument is adopting the contention of Beatson, above n 47, 17, that an account of profits is a monetised form of specific performance.

[99] Eg, it may assist in determining whether the law should adopt the approach to remedies advocated by Hammond, above n 80, referred to as ‘discretionary remedialism’ by Peter Birks in his two articles which critique Hammond’s approach: ‘Three Kinds of Objection to Discretionary Remedialism’ (2000) 29 University of Western Australian Law Review 1; ‘Rights, Wrongs and Remedies’ (2000) 20 Oxford Journal of Legal Studies 1.

[100] Burrows, above n 10, 304.

[101] [1982] 8 FSR 147, 159. The High Court in Warman International Ltd v Dwyer (1995) 182 CLR 554, 558 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) repeated this approach, but indicated that it should be applied with as much accuracy as possible.

[102] [2000] UKHL 45; [2000] 4 All ER 385, 400.

[103] See below Part VII.

[104] Burrows, above n 10, 287.

[105] Sarah Worthington, ‘Reconsidering Disgorgement for Wrongs’ (1999) 62 Modern Law Review 218, 221; Lionel Smith, ‘The Province of the Law of Restitution’ (1992) 71 Canadian Bar Review 672, 683–4.

[106] Worthington, above n 105, 220–1. In Dart Industries Inc v Décor Corp Pty Ltd [1993] HCA 54; (1993) 179 CLR 101, 114 (Mason CJ, Deane, Dawson and Toohey JJ), the High Court asserted an unjust enrichment foundation for an account of profits in an intellectual property case, but did not explain that foundation. Subsequently, in Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 556–7 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) the High Court rejected any unjust enrichment foundation for an account of profits ordered against a fiduciary for breach of his fiduciary obligations. Worthington, above n 105, 220 also criticises the assumption that the existence of a wrong justifies the conclusion that the defendant’s enrichment was ‘unjust’ in the relevant sense.

[107] Worthington, above n 105, 222.

[108] Worthington, above n 105, 219–20; Smith, above n 105, 696.

[109] James Edelman, ‘Gain-Based Remedies for Wrongdoing’ (2000) 74 Australian Law Journal 231.

[110] Ibid 233–4.

[111] Ibid 233.

[112] Ibid 234.

[113] Edelman, ‘Restitutionary Damages and Disgorgement Damages’, above n 39, 151. Others have included this lesser measure remedy within compensatory damages. Eg, in their classic article on the interests protected by compensation, L L Fuller and William Perdue noted that the third interest protected by compensatory damages was called the ‘restitution interest’: ‘The Reliance Interest in Contract Damages’ (1936) 46 Yale Law Journal 52, 53–4. Mason, Wilson and Dawson JJ appeared to employ the term ‘reliance loss’ as comprising the restitution interest in Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 12. See also Samuel Stoljar, ‘Restitutionary Relief for Breach of Contract’ (1989) 2 Journal of Contract Law 1; Mason and Carter, above n 44, [1801]–[1842].

[114] Harvey McGregor, ‘Restitutionary Damages’ in Peter Birks (ed), Wrongs and Remedies in the Twenty-First Century (1996) 203, 203 (emphasis in original).

[115] Ibid. A similar definition appears in Halsbury’s Laws of England (4th ed, 1998), vol 12(1), [802]: ‘“Damages” are the pecuniary recompense given by process of law to a person for the actionable wrong that another has done him.’

[116] [1991] HCA 15; (1991) 172 CLR 60, 63 (citations omitted), citing Skelton v Collins [1966] HCA 14; (1966) 115 CLR 94, 128 (Windeyer J); Parry v Cleaver [1969] UKHL 2; [1970] AC 1, 13.

[117] That is, once all the elements of the breach of the obligation (and the matters necessary to attract the availability of the restitutionary remedy, as seen in Blake [1997] EWCA Civ 3008; [1998] 1 All ER 833) are established, then the plaintiff has a right to the remedy.

[118] Patricia Loughlan, ‘The Historical Role of the Equitable Jurisdiction’ in Patrick Parkinson (ed), The Principles of Equity (1996) 3, 17. Cf Birks’ contention in ‘Three Kinds of Objection to Discretionary Remedialism’, above n 99, 13–14 that equitable remedies are not discretionary. This contention is not supported by authority.

[119] See Loughlan, above n 118, 17, where the author refers to the ‘judicial’ nature of the exercise and argues that it is not a matter of ‘personal conscience’.

[120] Loan Investment Corp of Australia v Bonner [1969] UKPC 33; [1970] NZLR 724, 744.

[121] Jeffrey Berryman et al, Remedies: Cases and Materials (3rd ed, 1997) 1153.

[122] Tilbury, above n 88, [6030].

[123] Ibid.

[124] Spry, above n 79, 25.

[125] Ibid 1.

[126] Justice Michael McHugh, ‘The Judicial Method’ (1998) 73 Australian Law Journal 37.

[127] See, eg, Wik Peoples v Queensland (1996) 187 CLR 1, 179–80; Esanda Finance Corp Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241, 298.

[128] Tilbury, above n 88, [6030].

[129] But see Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317, 324–5 (Kirby P) as to the difficulties (and hence limits) in taking into account the interests of third parties in the contexts of injunctions. See also at 331–2 (Meagher JA).

[130] Tilbury, above n 88, [6030].

[131] Ibid.

[132] See also John Glover, Commercial Equity: Fiduciary Relationships (1995) [6.121] and Mason and Carter, above n 44, [1532] for an exploration of the effect of bankruptcy law on claims for restitutionary damages and an account of profits following a breach of fiduciary duty.


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