Restitution and Unjust Enrichment
The law of restitution reverses unjust enrichment: a remedy where one party has been enriched at another's expense in circumstances the law considers unjust.
Introduction
Restitution and unjust enrichment is a distinct branch of English private law, alongside contract, tort, and equity. It addresses situations where a defendant has been enriched at the claimant's expense in circumstances the law treats as 'unjust' — paradigmatically, mistaken payments, failure of consideration, and benefits obtained by wrongs. Since the House of Lords' decision in Lipkin Gorman v Karpnale [1991] 2 AC 548 the cause of action has been recognised as autonomous (no longer dependent on implied contract). The Supreme Court's restatement in Investment Trust Companies v HMRC [2017] UKSC 29 confirmed the four-stage test: (1) the defendant has been enriched; (2) the enrichment was at the claimant's expense; (3) the enrichment was unjust; (4) no defence applies (change of position, bona fide purchase, ministerial receipt, statute, etc.). The law continues to evolve, particularly on issues of agency, anticipatory enrichment, and the boundary with restitution for wrongs.
In Brief
Restitution is the body of law that reverses unjust enrichment. To succeed, the claimant must show (1) the defendant was enriched, (2) at the claimant's expense, (3) for an 'unjust' reason such as mistake, failure of consideration, or duress, and (4) no defence applies. The leading modern authority is Investment Trust Companies v HMRC [2017] UKSC 29.
Core Principles
The four-stage test — Investment Trust Companies v HMRC [2017]: enrichment, at the claimant's expense, unjust factor, no defence.
Autonomy of restitution — Lipkin Gorman v Karpnale [1991]: cause of action no longer rests on implied contract.
Unjust factors include mistake (DMG v IRC), failure of consideration (Fibrosa, Roxborough), duress, undue influence, and ultra vires receipts (Woolwich Equitable BS v IRC).
Change of position is the primary defence (Lipkin Gorman; Niru Battery Manufacturing).
Subrogation, equitable proprietary remedies, and accounts of profits all sit within or adjacent to restitution.
Restitution for wrongs (gain-based remedies for tort, breach of contract, equitable wrong) is a separate strand — Attorney-General v Blake [2001] UKHL 45.
Key Statutes
Law Reform (Frustrated Contracts) Act 1943
Limitation Act 1980
Leading Cases
Lipkin Gorman v Karpnale Ltd
[1991] 2 AC 548
Westdeutsche Landesbank v Islington LBC
[1996] AC 669
Banque Financière de la Cité v Parc (Battersea) Ltd
[1999] 1 AC 221
Deutsche Morgan Grenfell v IRC
[2006] UKHL 49
Investment Trust Companies v HMRC
[2017] UKSC 29
Prudential Assurance Co Ltd v HMRC
[2018] UKSC 39
School Facility Management v Governing Body of Christ the King College
[2020] EWHC 1118
Frequently Asked Questions
Is restitution the same as damages?
No. Damages compensate the claimant for loss; restitution strips the defendant of gain. The two often diverge in measure. Restitution is gain-based; tort and contract damages are loss-based (although there are gain-based exceptions like Attorney-General v Blake).
What are the main 'unjust factors'?
Mistake (of fact or law), failure of consideration (including total failure of basis), duress, undue influence, exploitation of weakness, ultra vires demands by public authorities (Woolwich), and necessity (the Falcke/Owen v Tate line). Each has detailed authority.
What is the 'change of position' defence?
If the defendant has in good faith spent or relied on the enrichment in such a way that requiring repayment would now be inequitable, the defence reduces or extinguishes liability (Lipkin Gorman). It is fact-sensitive — the change must be causally linked to receipt of the enrichment.
What's the limitation period for a restitution claim?
Six years from the date of the cause of action's accrual under the Limitation Act 1980 s.5 (treated as analogous to contract). Where the claim is for mistake, time runs from the date the mistake was, or could reasonably have been, discovered (s.32) — see Deutsche Morgan Grenfell v IRC [2006] UKHL 49.
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