Lloyd's Maritime and Commercial Law Quarterly
RESTITUTIONARY DAMAGES FOR BREACH OF CONTRACT: SNEPP AND THE FUSION OF LAW AND EQUITY
Peter Birks*
A. Introduction
In the spirit of United Scientific Holdings Ltd. v. Burnley B.C.,1 probably the House of Lords’ sternest admonition to take the fusion of law and equity seriously, and in the conviction that an account of profits is an exercise not qualitatively different from an enquiry as to losses, the phrase “restitutionary damages” is here used generically, in tacit contrast with “compensatory damages”, to denote any money award for breach measured by the contract-breaker’s gain rather than by the victim’s loss.2 Hence, the general question implicit in the title is whether the victim of a breach of contract can ever claim in that measure. Nevertheless, the primary concern will be a somewhat narrower issue, namely, deliberate recourse to breach of contract for the sake of making a gain. Suppose someone sees that by breaking his contract he can make a substantial profit: then, calculating that his likely gains will far outweigh any loss for which he might have to compensate his victim, he cynically decides to throw his contract over. In that strong case (and without prejudice to any other), can the victim claim the contract breaker’s profits?
We are not concerned with restitution for what is traditionally called “failure of consideration”, where the cause of action is not breach of contract.3 In other words, our business is with the case in which the plaintiff, if he says that the defendant was enriched at his expense, means that he was enriched by doing him wrong, not that he was enriched by subtraction from his wealth. These two senses of “at the expense of” mark the principal division in the law of restitution. Where the “wrong” sense is in question, the enquiry is about nothing other than the availability of the restitutionary measure of recovery for torts, breaches of contract and
* Professor of Civil Law, University of Edinburgh.
1. [1978] A.C. 904, esp. 925–6, per Lord Diplock.
2. A claim for profits was distinguished from damages in Watson v. Holliday (1882) 20 Ch.D. 780, on historical rather than analytical grounds. McGregor’s first line builds compensation into the definition: “Damages are the pecuniary compensation, obtainable by success in an action, for a wrong which is either a tort or a breach of contract …”: McGregor on Damages, 14th edn. (1980), 1. This would exclude even punitive awards. Dawson, however, accepted that nothing obstructs calling all measures of unliquidated money award by the same name: J. P. Dawson, “Restitution or Damages” (1959) 20 Ohio St.L.J. 175, 180 ff. Burrows uses “restitutionary damages” while retaining a separate head of equitable accounting: A. S. Burrows, Remedies for Torts and Breaches of Contract (1987) 258 ff. There is also Canadian approval: “Whether damages … be viewed as an accounting of profits or, what amounts to the same thing, as based on unjust enrichment, I would not interfere with the quantum”: Canadian Aero Services Ltd. v. O’Malley (1973) 40 D.L.R. (3d) 371, 392, per Laskin, J.; cf. Guertin v. Royal Bank of Canada (1983) 1 D.L.R. (4th) 68, 83–89, per Cromarty, J.
3. This is disputed, notably by P. S. Atiyah, most recently in Essays in Contract (1986), 50, replying to Birks, “Restitution and Freedom of Contract” (1983) 36 C.L.P. 141.
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