Restitution
front page

What's new?

Archive front page

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2007

2006

2008

2009

You may be surprised to learn that the relative merits of unjust factors v. lack of juristic reason as basis of restitutionary claims in the common-law world have been the subject of a number of recent publications by Germans apparently eager to reform English law, in particular by Reinhard Zimmermann and Sonja Meier. Unfortunately, most of the discussion (most notably Meier's massive doctoral dissertation "Irrtum und Zweckverfehlung", Tuebingen 1999) is in German and therefore likely to be of limited impact on the debate in England, but Meier and Zimmermann have repeatedly set forth their views in English as well (most recently in [1999] C.L.J. 567 and (1999) 115 L.Q.R. 556). I would be interested to hear what people think about their argument, mainly because I am not entirely convinced by it myself.

If I understand them correctly, Meier and Zimmermann regard English law's insistence on unjust factors, rather than absence of juristic reason, as completely wrongheaded and unworkable. As far as I can see, they give two main reasons for this. Firstly, they claim that English lawyers are kidding themselves if they think they can do without absence of juristic reason, for in fact it is implicit in their system as well. For example, there are a number of English cases which state that money that was actually owed cannot be recovered, even though paid by mistake. It is clear that in this situation a recognised unjust factor is present (i.e. mistake), hence, according to Meier/Zimmermann, if English law were really serious about unjust factors, you should get your money back. If you don't, it must mean that English law sneakily looks at whether there is a legal ground as well, without ever owing up to it. Secondly, they argue that contrary to English lawyers' belief that emphasis on unjust factors restricts recovery, it could actually open the floodgates, if taken seriously. Think of the (obviously thorny) area of non-liability mistakes. If you intend to give £100 to charity and by mistake pay £1,000, it is only fair that you should get £900 back. However, it is a different matter if you actually intend to give £1,000 but discover years later that one of the directors of the charity was a person you hate and to whom you would never have given any money, or whatever. English law does not distinguish between these two scenarios, which are both cases of money paid under a mistake of fact, although it would need to do so in order to bar unreasonable claims for restitution by donors who want to go back on their gifts. But again, Meier/Zimmermann argue, you cannot really distinguish between mistakes (or other unjust factors) in "forming the intention to give something" and mistakes in "executing this intention" without considering whether there is a juristic reason for the payment.

Meier/Zimmermann also offer an explanation as to why English law took what they consider to be such a devious route. Somewhat surprisingly, this turns out to be the doctrine of consideration. Meier/Zimmermann believe that, on account of the consideration requirement, lots of agreements which would be enforceable contracts elsewhere are unenforceable under English law, hence cannot be used as a juristic reason, and therefore English lawyers had to think up another yardstick by which to gauge claims for recovery. To be frank, this explanation, apparently inspired by Larner v. LCC, seems a bit wide of the mark, if only on historical grounds. My impression is that Meier/Zimmermann are trying to explain one aspect of English law which they do not like by another they would also like to be changed. I would suspect that it is simply much more intuitive to say that you get back money paid by mistake, extorted from you etc., than to say that you get back money because the legal basis for payment was absent; and it is not surprising that English law has opted for the more intuitive approach.

On the other hand, while I do not find the Meier/Zimmermann line of argument convincing, there are a number of misconceptions about the "absence of legal ground" approach common among English lawyers which, in my view, should be laid to rest in order to make the discussion more productive.

The first of these misconceptions is that, under the continental system, the burden of proof that there was legal ground for a payment is on the payee. At least for German law, that is not the case. In fact, the claimant who seeks restitution needs to prove (1) that the defendant is enriched and (2) absence of a legal ground for the enrichment. Thus, for example, if an insurance company pays out on a claim and later has second thoughts, German law requires the insurance company to prove that it did not have to pay in order to get its money back, rather than requiring the payee to prove that he or she was entitled to receive the money in order to keep it. In fact, both systems are virtually indistinguishable in their operation as far as liability mistakes are concerned; the only major practical difference is the status of the person who pays when in doubt, who can recover under German law but not under English law, at least not in theory (but see Nurdin and Peacock v. D. B. Ramsden, where a way was found round this problem).

The second misconception is that "Rechtsgrund" necessarily means "debt", and therefore to adopt a "legal ground" analysis in England would require an overhaul of the law of gifts. I would argue, contra Meier/Zimmermann, that you do not really need any sophisticated "legal ground" analysis in order to explain the fact that you may keep money paid to you as an actual debt - in my view, that is implicit in the idea of a debt. In fact, "Rechtsgrund" analysis is used precisely in order to explain why you may sometimes retain money to which you had no enforceable claim and sometimes not. So, in order to explain that you may keep money paid as a valid gift, under an unenforceable contract or on a debt barred by statute of limitation, German law says that there is a "Rechtsgrund", while in the case of an invalid gift or a void contract there is not. Of course, whether this has any greater explanatory force than the English ragbag of "unjust factors" seems to me open to debate.

Finally, I would want to warn against the belief that "legal ground" or "Rechtsgrund" has a clearly defined meaning in continental legal systems. In reality, there is a heated if somewhat arcane debate on this, at least in Germany. First of all, "Rechtsgrund" is to some extent dependent on the idea of "Leistung", which in itself is highly complex and contentious. In addition, there is an "objective" school which thinks that "Rechtsgrund" means the actual obligation, gift relationship or whatever, while according to the "subjective" school it is the intention to discharge the debt, make the gift etc. and therefore "absence of legal ground" really means failure of purpose. There are various sub-schools which argue about whether it is the actual or "natural" purpose of the payor which counts or whether there are only three types of purpose which are legally relevant, namely solvendi, donandi and obligandi causa (i.e., to pay a debt, to make a gift and to create a debt), and about other things too tedious to relate. So far, courts have been reluctant to commit themselves to any of these theories; instead, they tend to stress that each case has to be considered individually on its merits. Which probably goes to show that, if you develop restitution theory to too sophisticated a level, you will only make yourself utterly irrelevant in practice...

Christoph Coen
Freiburg University, Germany