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Although I would not want to whip-up the recent frenzy with O'Brien, which led in to the discussion about terminology, I would like to bring together two of the recent threads in the RDG and in doing that provide an excursion to post-O'Brien Scots law.

Allan Axelrod questioned whether there was in English law anything worthy of the title "the law of restitution". Eoin O'Dell suggested that Barclays Bank v O'Brien was not a "restitution" case.

On the first point, Allan Axelrod is probably right that there is no law OF restitution in English law. Of course, a great deal of the debate may be semantical. The problems would go away if we decided on a coherent structure for the law of obligations (in as much as that is a recognised category in English law). If we came down in favour of a response-based classification (the responses being (i) to perform, (ii) to pay and (iii) to restore) then it would be true to say that there was a law OF restitution. At present there is certainly law ON restitution in England (and for the purposes of differentiation and analysis it may be subdivided into autonomous unjust enrichment and restitution for wrongs). I understand that Dr Stapleton considers this in The Classification of Obligations (although it has not arrived in my library yet).

The link between the first and second points is the question whether the law ON restitution is best subdivided into two for analytical purposes. Would it not be better subdivided into three? My query is prompted by a consideration of O'Brien. Members of the list will probably know that from 12 June 1997 Scots law was brought into line with O'Brien by the House of Lords in Smith v Bank of Scotland (because it is judicial law making it is therefore theoretically retrospective). Luckily the House of Lords did not impose the mechanics of the decision in O'Brien on Scots law. There is now a debate simmering up here on the meaning of the decision in Smith. The artificial concept of a vitiated "transaction" between the spouses was not used and consequently constructive notice was not adopted. The same outcome as O'Brien was achieved by utilising the long-standing but obscure principle of good faith in Scots contract law. Where the bank reasonably suspects that there is a risk of influence or misrepresentation as between guarantor and third party (usually the debtor) a duty is imposed on the bank to advise the potential guarantor of the effect of the transaction and the need to take of independent advice. Failure in that duty will open up the transaction to reduction.

After Smith it was therefore reasonably clear that the approach in Scots law was to be horizontal - focusing on the main guarantee transaction and the factors which would vitiate that transaction (for this you will have to imagine a right-angled triangle: the horizontal side is the main guarantee transaction between the guarantor on the left and the bank on the right; vertically above the guarantor is the third party; and the third party is connected to the bank diagonally). This would contrast with (1) the vertical approach: vitiation of the guarantor's consent by the third party (perhaps the approach taken by John Mee in 1995 NILQ) and (2) the diagonal approach: transferring the vitiation onto the bank through constructive notice or taking a policy-motivated approach (the O'Brien approach). The vertical approach is plaintiff-sided (vitiation) whereas the diagonal approach appears to be defendant-sided (transferred vitiation/exploitation/unconscionability). The horizontal approach is arguably the least artificial, focusing as it does on the main transaction before the court.

This was the understanding until the decision in the Outer House of the Court of Session in Braithwaite v Bank of Scotland (20 November). In this case the commercial judge held that as well as requiring to prove the failure to give advice the pursuer also has to prove actual misrepresentation or undue influence by the third party. This appears to me as a step back towards O'Brien, despite the House of Lords in Smith making it very clear that the mechanisms in O'Brien simply did not translate into Scots law.

This brings me back to Eoin O'Dell's suggestion about O'Brien. In two senses O'Brien is not a restitution case. In the first place, no claim was made for the return of anything (unless one considers that the freedom not to be bound by the guarantee is a res - I do not think that legal scholarship has reached this level of sophistication/abstraction yet). Secondly, even if property had been transferred and was being claimed back, there is the strong argument that the return of the property would be made under the remedy of restitution in integrum. In this sense it might be better to claim that such cases are not "autonomous unjust enrichment" cases - they are clearly about restitution in the wider sense and the remedy of restitution in integrum/return of benefits after voidable contracts is correctly underpinned by the principle against unjust enrichment.

As everyone might have expected, all of the discussion so far in Scots law has taken place within the four corners of contract law. The guarantees are voidable and require to be rescinded. As part of rescission, restitution in integrum will be necessary. In Scots law at present there is simply no way that these would be seen as autonomous unjust enrichment cases (that the pursuer could ignore the remedy of reduction/rescission and instead go straight for a condictio). Nevertheless, an interesting point might be: what if restitution in integrum is not possible and rescission is therefore barred? Will the pursuer/plaintiff then be able to claim an independent/autonomous remedy by means of the condictiones (in Scots law)/some unjust factor (in English law)? What about the non-rescinded contract - will it bar a pure restitutionary claim (Danie Visser in 1992 Acta Juridica appears to question whether an existing contract (and therefore causa dandi) will necessarily bar an enrichment claim, at least in South African law)?

The only reason that I pose these (perhaps flawed) questions is that in Braithwaite v Bank of Scotland the guarantee was enforced and the pursuer is seeking the return of her portfolio of shares and unit trusts (which was transferred to the bank to secure the business debts of her husband and was subsequently sold by the bank). The restitutionary aspects are therefore in focus.

This discussion of O'Brien is to allow me to ask whether it might now be time to exclude from autonomous unjust enrichment all those cases which are based on contract vitiation. This would give three subdivisions in the law on restitution: (i) restitution after failed contracts (the availability of rescission would be governed by contract law but the effect of rescission on the enrichment would be governed by the rules on restitution), (ii) autonomous unjust enrichment (no-contract cases, including of course void "contracts") and (iii) restitution for wrongs. If we accept that in the law of obligations there should be three main sources of obligations/causes of action (contract, autonomous unjust enrichment and tort/delict) is it not right that we should consider the restitutionary remedy (the law on restitution) in each of these three categories. Is it not time to accept that the enrichment-methods are important and recognise that the wide principle against unjust enrichment, for which the remedy is restitution of that enrichment, is best viewed in the context of enrichment-methods: (i) unjust enrichment through contracts (which fail); (ii) unjust enrichment through wrongs and (iii) unjust enrichment in any other way. Distinguishing autonomous unjust enrichment from unjust enrichment is just as important as distinguishing unjust enrichment from restitution.

I apologise for any well-meant sloppiness of thought. Having the spirit of O'Brien in Scots law just appears to throw up a number of issues about the relationship between the law of contract and restitutionary remedies (and therefore about the scope of restitution given independently of contract or tort/delict). In any event, I think that I should reserve further comment until I have read The Classification of Obligations.

Scott Dickson
Intrant of the Faculty of Advocates
Edinburgh

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