Part III Chap 3

Panagopoulos, George. "Preferred Choice of Law Rule." Restitution in Private International Law.
London: Hart Publishing, 2000. 159–184. Bloomsbury Collections. Web. 17 Jun. 2022. <http://
dx.doi.org/10.5040/9781472562180.ch-008>.
Downloaded from Bloomsbury Collections, www.bloomsburycollections.com, 17 June 2022,

18:44 UTC.
Access provided by: Damodaram Sanjivayya National Law University
Copyright © George Panagopoulos 2000. All rights reserved. Further reproduction or distribution
is prohibited without prior permission in writing from the publishers.
8
Preferred Choice of Law Rule
1 THE ESSENTIAL ELEMENT OF THE UNJUST FACTOR
level, it can be said that matters of unjust enrichment are

A T A GENERAL
governed by the proper law of the alleged unjust enrichment. This in itself
does not tell us very much. The quest here is to identify a more specific rule
which will point us to the proper law. Given the lack of authority on this ques-
tion, the field is open for a principled and reasoned solution to the question of
the choice of law rule for matters of unjust enrichment. The essential question
in developing such a choice of law rule, is to ascertain the element in a restitu-
tionary claim which might be isolated as being of such significance that it should
be used to determine the applicable law. It is submitted that the most significant
element, for the purposes of choice of law, is the “unjust factor”; that is to say,
the circumstance which renders the receipt of a benefit unjust at the expense of
another. A connecting factor which focused on this element would be both sen-
sitive to the nature of unjust enrichment claims and the variety of circumstances
in which such claims arise.
The unjust factor is at the heart of an unjust enrichment, being the means by
which the law determines the various circumstances where enrichment should
be reversed. It is this element which triggers the reason or cause for restitution;
and, in principle, the system of law most closely connected with the unjust fac-
tor should govern any restitutionary duty. Although important legal issues may
arise in relation to whether there has been “enrichment” and whether such
enrichment was “at the expense of the plaintiff”,1 these are predominantly fac-
tual questions. These are simply questions of whether there has in fact occurred
a shift of value or wealth from the plaintiff to the defendant, such that a prima
facie claim in unjust enrichment may be available. They are similar to the ques-
tion of whether there was loss or damage in contractual or tortious claims. The
law may of course assist by determining whether there was for example enrich-
ment, especially in certain borderline situations. However, it is the issue of
whether the receipt of such enrichment is in fact “unjust” which ultimately gives
rise to a restitutionary duty; this is where the law imposes its values. That is to
say, the unjust factor isolates the circumstances where an enrichment may be
reversed. As such, it is only logical that, as a matter of principle, the proper law
of the alleged unjust factor should govern the right of restitution. It is that legal
system which should have the most to say on the matter, whether this be the law
1
See Ch. I, §§2.1 and 2.2.
160 Choice of Law Rules for Restitutionary Issues
of the place with the closest and most real connection with, or alternatively the
law most closely connected to, the alleged unjust factor.
For the purposes of private international law, the closest analogy with unjust
enrichment is tort. Both are non-consensual rights and obligations imposed by
operation of law. They are both imposed in circumstances independently of the
parties’ wishes. The imposition or non-imposition of these liabilities ultimately
reflects the legal values of a particular legal system. Unlike contracts, they are
not consensually created by express or implied reference to a particular legal
system. Tort and unjust enrichment are rights and obligations which are
imposed by a legal system ex post facto so as to remedy a wrong or to reverse an
unjust enrichment, respectively.
In cases of torts, the general approach is to apply the lex loci delicti, namely
the law of the place where the wrong occurred.2 The Private International Law
(Miscellaneous Provisions) Act 1995 (the “Act”) has essentially adopted the lex
loci delicti rule as its basic tenet.3 The general rule under s.11(1) of the Act is that
in cases of torts, the applicable law is the law of the country in which the events
constituting the tort in question occurred, namely, where the wrong occurred.
In cases where the events constituting the tort have occurred in different coun-
tries, there are more specific rules. In a cause of action in respect of personal
injury, the applicable law is the law of the country where the individual was
when he sustained the injury;4 in relation to damage to property, the applicable
law is the law of the place where the property was when it was damaged;5 while
in all other cases this is the “law of the country in which the most significant ele-
ment or elements of those events occurred”.6 Thus, where for example, A, an
Australian, negligently injures B, an Englishman, in a motor vehicle accident in
France, the applicable law will be the law of France.7 This is the law of the place
where the wrong was committed. Admittedly, in relation to causes of action in
respect of personal injury or damage to property, the Act deems the applicable
law. Although such a law will generally also amount to the law of the place of
the wrong, such a rule is not necessarily the same as a lex loci delicti rule. This
2 The lex loci delicti rule was recently adopted in Canada in Tolofson v. Jensen; Lucas v. Gagnon
(1994) 120 D.L.R. 4th 289; and in Australia: John Pfeifer Pty. Ltd. v. Rogerson, 21 June 2000 (unre-
ported) (H.C.A.). It is the general choice of law rule for torts in most continental systems: see
Appendix, Law Com. W.P. No. 87 (1984). It remains the choice of law rule for torts in ten states of
the U.S.A., namely, Alabama, Georgia, Kansas, Maryland, Montana, New Mexico, North
Carolina, Virginia, Wyoming (also possibly West Virginia): see S. Symeonides, “Choice of Law in
the American Courts in 1997” [1998] 46 A.J.C.L. 233; also S. Symeonides, “Choice of Law in the
American Courts in 1998” [1999] 47 A.J.C.L. 327.
3 See Dicey and Morris, p.1544; Jaffey, p.257. See also Cheshire and North, p.629; A. Briggs,
“Choice of law in tort and delict” [1995] L.M.C.L.Q. 519, 521; C.Morse, “Torts in Private
International Law: A New Statutory Framework” (1996) 45 I.C.L.Q. 888, 896. One commentator
has described the approach under the Act as a “statutory lex loci delicti”: B. Rodger, “Ascertaining
the Statutory Lex Loci Delicti”(1998) 7 I.C.L.Q. 205.
4
Section 11(2)(a).
5
Section 11(2)(b).
6
Section 11(2)(c).
7
See s.11(2)(a) of the Private International Law (Miscellaneous Provisions) Act 1995.
Preferred Choice of Law Rule 161
situation is largely based on practical and policy considerations in the ascer-

tainment of the applicable law in cases of personal injury and damage to prop-
erty.8 The general rule contained in s.11(1), as well as the residual, “in any other
case”, rule contained in s.11(2)(c), are essentially lex loci delicti rules and it is
these more general rules which are of assistance in determining the choice of law
rule for unjust enrichment. Finally, it should be noted that there is a general
exception to the tort choice of law rule in s.12. Where in the circumstances9 it is
“substantially more appropriate for the applicable law for determining the
issues arising in the case” to be the law of another country, then its law will
apply.
One might point out, however, that, in the case of torts, the question is not
where the wrong was committed as such. It is a question of where the events
constituting the tort occurred, or, where these events have occurred in several
jurisdictions, it is where the most significant element or elements of the events
constituting the tort occurred. The occurrence of damage may in itself be con-
sidered a significant element. The place where such damage occurred may not
correspond with where the “wrong” itself was committed. The current English
position, it may be argued, is not a lex loci delicti rule as such. It may therefore
be said that, in cases of international restitution, one should also look for the
most significant element or elements, which may in certain situations be, for
example, the place of enrichment.
However, it is submitted that the most significant element in a tort will almost
invariably be the commission of the wrong or wrongful conduct.10 First, the
general intention of the Act was to effectively replace the double actionability
rule with a lex loci delicti rule,11 while this is also how the majority of com-
mentators have interpreted it.12 Secondly, although the residual rule concen-
trates on the most significant element or elements constituting the alleged tort,
it is submitted that the courts will invariably have to ask where the wrong was
committed. Guidance may be found from the “substance” test which is used to
determine the place of commission of a tort at common law. According to this
view, one had to look at the sequence of events constituting the tort and ask the
question, where in substance did the cause of action arise?13 In formulating this
test, Lord Pearson added:
8
See for example, Law Commission Working Paper No. 87 (1984), para 4.70.
9
Namely “the significance of factors which connect a tort or delict with the country whose law
would be the applicable law under the general rule; and . . . the significance of any factors connect-
ing the tort or delict with another country”: see s.12(1).
10 See also P. Birks, “The Concept of a Civil Wrong” in D. Owen (ed.), Philosophical
Foundations of Tort Law (Oxford, 1995) pp.31, 37–45.

11 See Law Commission Working Paper No.87, Choice of Law in Tort and Delict (1984); Law
Commission No. 193, Choice of Law in Tort and Delict (1990).

12 See Dicey and Morris, p.1544; Jaffey, p.257; B. Rodger, “Ascertaining the Statutory Lex Loci
Delicti”(1998) 47 I.C.L.Q. 205; C. Morse, “Torts in Private International Law: A New Statutory
Framework” (1996) I.C.L.Q. 888. See also Cheshire and North, p.629; A. Briggs, “Choice of law in
tort and delict” [1995] L.M.C.L.Q. 519, 521.
13 Distillers Co. Ltd. v. Thompson [1971] A.C. 458, 468, per Lord Pearson (P.C.).
It is not the right approach to say that, because there was no complete tort until the
damage occurred, therefore the cause of action arose wherever the damage happened
to occur.14
It would therefore follow that, where the acts on the part of the defendant which
give rise to the alleged tort and the resultant damage occur in different jurisdic-
tions, the wrong, it is submitted, is, as a general rule, committed in the former.15
In Jackson v. Spittall, it was held that the question of whether a cause of action
was to be classified as local or foreign is to be answered by ascertaining the place
of the “act on the part of the defendant which gives the plaintiff his cause of
complaint”.16 In Distillers Co. Ltd. v. Thompson,17 the cause of action arose in
the place where the failure to warn of the dangers of a product occurred.18 This
also happened to be the jurisdiction where the damage occurred. Yet, the
emphasis was placed on the tort arising where the failure to warn occurred. In
isolating the failure to warn, Lord Pearson stated:
That is the act (which must include omission) on the part of the English Company [the
defendant] which has given the plaintiff a cause of complaint in law.19
This, together with Lord Pearson’s view that a defendant should have to answer
for his wrongdoing in the country where he did the wrong, suggests that, if the
damage had occurred in a third jurisdiction, for example if the product had been
used in a jurisdiction other than that of purchase, the tort would have occurred
in the place where the failure to warn occurred. This view is confirmed by the
High Court of Australia’s interpretation in Voth v. Manildra Flour Mills Pty
Ltd., “[o]ne thing that is clear from Jackson v. Spittall and from Distillers is that
it is some act of the defendant, and not its consequences, that must be the focus
of attention”.20 It has therefore been held that an action in relation to the negli-
gence of an accountant arises in the place where the accountancy services are
provided,21 while the negligent services of a law firm are committed in the place
where the firm operated.22 In cases of fraudulent or negligent representations,
the cause of action arises at the place where the communication is received, not
necessarily the place where the statement is acted upon or where the relevant
14
Distillers Co. Ltd. v. Thompson [1971] A.C. 458, 468, per Lord Pearson (P.C.).
15
Jackson v. Spittal (1870) L.R. C.P. 542, 552; Distillers Co. Ltd. v. Thompson [1971] A.C. 458,
467–8 per Lord Pearson; Voth v. Manildra Flour Mills Pty Ltd. (1990) 171 C.L.R. 538, 567. Cf.
Metall und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc. [1990] 1 Q.B. 391.
16 (1870) L.R. C.P. 542, 552. See also Anderson v. Nobels Explosive (1906) 12 O.L.R. 644; Paul v.
Chandler and Fisher Ltd. [1924] 2 D.L.R. 479; Koop v. Bebb (1951) 84 C.L.R. 629; Buttigeig v.
Universal Terminal and Stevedoring Co. [1972] V.R.626. Cf. Jenner v. Sun Oil Co. [1952] 2 D.L.R.
526; Pindling v. National Broadcasting Corp. (1984) 14 D.L.R. (4th) 391.
17
[1971] A.C. 458.
18
Also George Monro Ltd. v. American Cynamid and Chemical Corp. [1944] K.B. 432, 439.
19
Distillers Co. Ltd. v. Thompson [1971] A.C. 458, 469. See also Castree v. Squibb Ltd. [1980] 1
W.L.R. 1248.
20
(1990) 171 C.L.R. 538, 567, per Mason C.J., Deane, Dawson and Gaudron J.J.
21
Voth v. Manildra Flour Mills Pty Ltd. (1990) 171 C.L.R. 538, 568–9 (H.C.A.).
22
National Bank of Canada v. Clifford Chance (1996) 30 O.R. (3d) 746 (Ont. C.J.).
loss arises.23 As the statement is directed to a recipient, it is, in substance, made

at the place to which it was directed. In a sense, the statement is “incomplete”
until it is received.24 An even more restrictive approach has been taken as to
where misstatements occur in the context of Article 5(3) of the Brussels
Convention. In Domicrest Ltd. v. Swiss Bank Corporation,25 the “place where
the harmful event occurred” has been held to be where the misstatement
occurs.26 Rix J. justified this as “[i]t is there that the negligence, even if not every
element of the tort, is likely to take place”.27 Likewise, in the case of defamation,
it has been held that, as publication is the material element in such cases, the tort
occurs where the statements are disseminated, rather than where they are first
written.28 Contrary to the above decisions, in Metall und Rohstoff AG v.
Donaldson Lufkin & Jenrette Inc.,29 it was held that the tort of inducing a
breach of contract was committed in England, where the breach and the result-
ing damage occurred, and not in New York, where the acts of inducement
occurred.
In determining the applicable law to an action for passing off, Scott V.-C. in
Waterford Wedgwood plc. v. David Nagli Ltd.30 sought to determine where the
actual passing off had occurred. Having identified the essential ingredient of
misrepresentation to the public,31 it was considered that passing off had
arguably32 occurred in Spain and New York, as it was passed off to particular
individuals in Spain, while it found its way into the retail market in New York.33
Scott V.-C.’s statements are consistent with the proposition that torts are gov-
erned by the place where the alleged wrong is committed. In looking at “the
events constituting the tort or delict”, he did not focus on the place where the
counterfeit Waterford Crystal was manufactured, namely Ireland, or the place
where the trademarks were registered, namely the U.K., or the place where
the alleged loss or damage arose.34 In conclusion, it is submitted that the most
23 Diamond v. Bank of London & Montreal [1979] Q.B. 333 (C.A.); The Albaforth [1984] 2
Lloyd’s Rep. 91 (C.A.); Voth v. Manildra Flour Mills Pty Ltd. (1990) 171 C.L.R. 538, 568. A similar
approach has been taken in relation to defamation under Art. 5(3) of the Brussels Convention. The
entire tort has been held to have occurred where the publisher was established, whereas the specific
damage is suffered in each state in which the publication was distributed: Shevill v. Press Alliance
S.A. (68/93) [1995] E.C.R. I–415.
24 Diamond v. Bank of London & Montreal [1979] Q.B. 333, 346, per Stephenson L.J.
25 [1999] 1 W.L.R. 364.
26 See also Cordova Land Co. v. Victor Bros. Inc. [1966] 1 W.L.R. 793, 798, 800.
27 Id., 382.
28 Bata v. Bata [1948] W.N. 366; Church of Scientology v. Metropolitan Police Commissioner
(1976) 120 Sol. Jo. 690.

29 [1990] 1 Q.B. 391.
30 [1998] F.S.R. 92.
31 Id., 105.
32 As no evidence of foreign law was presented before the court, there could be no finding of pass-
ing off.
33 See also Intercontex v. Schmidt [1988] F.S.R 575, 578; Cheshire and North, p.636.
34 In Modus Vivendi Limited v. The British Products Sanmex Company Limited [1997] I.L.Pr.
654, Knox J. drew a distinction between the place where the damage occurred and the place
where the loss was suffered in cases of passing off, in the context of Art. 5(3) of the Brussels
significant element or elements are those which give rise to the wrongful event
and not the resulting damage.
Why is it that the law of the place where the wrong is committed should gen-
erally govern liability? This was aptly described by Lord Pearson in a jurisdic-
tional context, stating that it is “manifestly just and reasonable that a defendant
should have to answer for his wrongdoing in the country where he did the
wrong”.35 A fortiori in the choice of law context, the defendant’s liability should
generally be governed by the law of the place where his wrongdoing was com-
mitted.36 A defendant should not be made liable pursuant to a particular law,
where his acts are either legitimate, or attract a different level of liability, under
the law of the place where such acts were committed. A defendant is therefore
able to regulate his acts according to the law of the various places where such
acts occur.
We may draw an analogy between the commission of the wrong and the cir-
cumstances making the relevant enrichment unjust, namely the unjust factor. A
plaintiff should also not be able to recover an enrichment from a defendant,
where, according to the law of the place where the alleged unjust factor arose,
no such restitutionary liability attaches. The liability of an enriched party
should generally be governed by the law of the place where the events which
allegedly render such an enrichment unjust occurred, or alternatively, the law
most closely connected to the alleged unjust factor. It is submitted that this is the
proper law of the duty to make restitution of an unjust enrichment.
The analogy between tort and restitution can be drawn even further. The
“damage” element in tort finds its parallel in the “enrichment” element in resti-
tution.37 Both these elements complete the action and are both questions of an
essentially factual nature. In international torts, the place where the damage
occurred is not viewed as being of such importance that its law should govern
liability. Such an argument should likewise extend to restitution and the place
of enrichment. As already seen, the place of enrichment is often arbitrary,
unconnected with the circumstances surrounding the claim for restitution and
often difficult to determine. Likewise an analogy may be drawn between the “at
the expense of” element and that of causation. Both these elements provide the
necessary nexus between the plaintiff and the defendant. While being undeni-
ably important elements to a claim in tort, the “damage” and “causation” ele-
ments are not of such significance as to dictate the tort choice of law rule.
It might be considered that the commission of the wrong finds its parallel
with the more general question of where the cause of action for unjust enrich-
Convention. The place where the damage occurred was held to have also been the place where the
passing off was effected, for the purpose of establishing “the place of the harmful event”.
35 Distillers Co. Ltd. v. Thompson [1971] A.C. 458, 468 (P.C.).
36 See also Phillips v. Eyre (1869) L.R. 4 Q.B. 225, 239; (1870) L.R. 6 Q.B. 1, 28; Canadian Pacific
Ry. v. Parent [1917] A.C. 195, 205, per Lord Haldane; Boys v. Chaplin [1971] A.C. 356, 389, per Lord
Wilberforce; Metall und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc. [1990] 1 Q.B. 391, 445.
37 Although certain torts do not actually require damage, the analogy is nonetheless helpful.
ment arose and not merely the unjust factor component of it. However, as
illustrated in the cases discussed above, where the resultant damage or loss
arise in a jurisdiction other than where the relevant acts constituting the wrong
occurred, the lex causae will generally be that of the latter. Thus, where a tort
comprises events in several jurisdictions, the question of where the wrong was
committed will not focus on where the entire cause of action arose, but rather
on the question of where the alleged wrongful conduct arose. By focusing on
the place where a wrong is committed, the choice of law rule isolates the legal
system most closely connected with the reason as to why the alleged wrong
should be redressed, namely, because the acts complained of are wrongful
under the legal system of where they occurred, or with which they are most
closely connected. Such a choice of law rule seeks to identify the locus of the
relevant acts constituting the alleged wrong, because they go to the reason for
liability.
As it is through the commission of the alleged wrongful conduct that the law
determines the circumstances in which damage must be compensated, so too in
cases of unjust enrichment, it is through the “unjust” factor that the law deter-
mines the circumstances in which enrichment received must be reversed. In tort,
it is the lex loci delicti’s legal values which are applied and not the law connected
with any other factor. The tortfeasor’s liability is measured by reference to the
law of the place where the relevant conduct occurred. These are the key ele-
ments in the two actions and the reasons behind the two actions: that which
makes the act “wrongful” or the enrichment “unjust”. Just as the lex loci delicti
determines liability for torts, so too the proper law of the unjust factor should
determine restitutionary liability. It is these two elements (the commission of the
wrong and the unjust factor) which are the essential ingredients in these two
forms of liability and through which a legal system imposes its particular legal
values. This is a significant consideration, given that both tort and unjust enrich-
ment arise by operation of law. The preferred choice of law rule should there-
fore focus on these two elements if it is to arrive at the most appropriate law to
govern the issue.
The parallel with torts can ultimately only be a guide. In examining a cause
of action in unjust enrichment, we note that the fundamental tenet of the case
and the essential reason for restitution is that which makes the enrichment
unjust, namely, the unjust factor. Put in another way, the gist of the action is the
circumstances which allegedly make the enrichment unjust. The choice of law
rule therefore must focus on the proper law of the alleged unjust factor. Thus,
where the event, or events, which allegedly make the enrichment unjust, namely
the unjust factor, and the enrichment occur in different jurisdictions, the proper
law of the unjust factor should determine the issue of restitutionary liability.
The place of enrichment merely completes the cause of action. If the place where
the damage occurs is not adopted as the locus of a tort, a fortiori the place of
enrichment should not be adopted as the choice of law rule for unjust enriche-
ment. As discussed previously, there are compelling arguments for not adopting
the place of enrichment rule.38 It is arbitrary; it gives a deceptively simple locus,

yet is often difficult to determine; it may not necessarily be connected with either
of the parties, or events; and, finally, but most importantly, it can be manipu-
lated by mala fide parties, who might ensure that they are “enriched” in juris-
dictions with rules that will suit their aims. On the other hand, the events
connected with the unjust factor will lie more at the heart of the cause of action.
It is therefore submitted that the choice of law rule for matters of unjust enrich-
ment should be the proper law of the unjust factor.
Such a choice of law rule creates a degree of predictability. Affairs can be reg-
ulated accordingly. For example, a bank or other financial institution which
engages in business in England estimates that, in any particular financial year, a
certain number of mistaken payments are made. If the applicable law is that
connected with the events giving rise to the unjust factor, namely the mistaken
payment, it can determine its position, as English law will apply to all these mis-
taken payments. If on the other hand the law of the place of enrichment applied,
its position would have to be determined each and every time a mistaken pay-
ment was made to a different jurisdiction. It would be left in an uncertain posi-
tion. All would depend on the fortuity of where payments might be made.
Greater uncertainty will arise if the proper law of the obligation applied. The
answer would depend on all the relevant circumstances, which will vary from
case to case. Ultimately much would depend on a degree of judicial discretion,
with the result that parties may be forced to litigate so as to find out the “proper
law”. The example referred to in relation to mistaken payments could apply
mutatis mutandis to businesses who need to know their position in relation to
fraud or other such activities.
At the same time, the proposed choice of law rule also allows for a degree of
flexibility. In searching for the law, or the law of the place, with which the
alleged unjust factor has its closest and most real connection, one must neces-
sarily pay attention to the events and circumstances of the particular case. It
does not focus on a particular arbitrary event such as the “place of enrichment”
which may often be unrelated to the alleged reason for restitution. However,
unlike the “proper law of the obligation”, the inquiry is more specific. It is not a
vague, abstract and broad notion such as that of the “proper law of the obliga-
tion”. Instead, it is more specific, focusing on the circumstances which give rise
to the alleged right of restitution.
2 DETERMINING THE PROPER LAW OF THE UNJUST FACTOR
As has already been discussed in the first chapter, the law of restitution operates
through certain defined “unjust” factors. These are the categories of cases or cir-
cumstances in which an enrichment will be reversed. The proper law of the
38 See above ch. 7.1.2 et seq.

unjust factor will invariably depend on the particular circumstances giving rise
to the alleged restitutionary liability. The circumstances therefore help identify
the lex causae. Therefore, although as a simple proposition the choice of law rule
searches for the law most closely connected with the unjust factor, as a matter of
practice, it is necessary to consider the various “unjust” categories separately.
Up until now we have referred to the proper law of the unjust factor. This
concept conveys two specific meanings. First, it may refer to the law of the place
with which the alleged unjust factor has its closest and most real connection.
Secondly, it may alternatively refer to the law with which the alleged unjust fac-
tor has its closest and most real connection. Under the first meaning, we would
be looking for the place with which the various circumstances giving rise to the
alleged unjust factor have their closest and most real connection. Under the sec-
ond, we would be looking for the legal system with which the alleged unjust fac-
tor has its closest and most real connection irrespective of any locus. Certain
unjust factors may be better at identifying a place whereas others may be more
suited to directly identifying a legal system. As will be shown, both these inter-
pretations have a role to play in arriving at the proper law of the unjust factor.
For choice of law purposes, unjust factors can be put into two broad categor-
ies. First, there are those cases where the unjust factor is event-based, thereby
providing a particular locus. Secondly, there are those cases where the unjust
factor is in the form of a legal rule. Such unjust factors are more suited to point-
ing to a legal system. In the first category, the event-based unjust factors, the
choice of law rule must seek to find the place with which the alleged unjust fac-
tor has its closest and most real connection which will be able to point us to the
lex causae. This covers cases such as mistake, illegitimate pressure and failure of
consideration. In such cases, the proper law to govern the issue of restitutionary
liability is the law of the place most closely connected with the particular event
and thus the reason for restitution. In the second, and narrower, category, the
law-based unjust factors, the choice of law rule will seek the law with which the
alleged unjust factor has its closest connection. This will cover cases such as
ultra vires demands or legal compulsion. In such cases, the unjust factor is con-
nected to a particular legal system rather than a place. That is, a particular legal
system rendered the demand ultra vires, or compelled the plaintiff to provide a
benefit. Such a legal system is the most appropriate also to determine the issue
of restitution. The unjust factor is therefore more suited to finding a law rather
than a place, as it has no real locus. Therefore, the general choice of law rule, in
terms of the proper law of the unjust factor, may be restated: restitutionary
issues are governed by the law, or the law of the place, with which the unjust
factor has its closest and most real connection.
A few observations now need to be made. The two categories of unjust fac-
tors mentioned above need not necessarily square up with any taxonomy of
unjust factors for the purposes of domestic law.39 Our present categorisation is
39
In relation to the taxonomy of unjust factors as a matter of domestic law, see P. Birks, “The
Law of Restitution at the End of an Epoch” (1999) 28 U.W.A.L.R. 13.
one made to assist us with arriving at the lex causae. Owing to their nature, cer-
tain unjust factors are better at identifying a place, whereas others are better at
directly identifying a legal system. If we wish to arrive at the law most closely
connected with the reason for restitution, we must acknowledge such a distinc-
tion. Having said that, it may be noted that the two categories mentioned may
nevertheless be matched with existing categories as a matter of domestic law.
The “event-based” category covers the two categories described as non-
voluntary transfer and unconscientious receipt.40 The law-based category
roughly covers what is referred to as policy motivated restitution, namely that
the law considers that there should be restitution.
The specific categories of unjust factors listed below are not put forward as
separate choice of law rules. They are merely examples of the general choice of
law rule’s application. Where the court has characterised a matter as giving rise
to an issue of restitutionary liability, its next task is to identify the factor which
allegedly makes the enrichment unjust or unjustifiable. In any cause of action in
unjust enrichment, there is always a reason why the plaintiff alleges the enrich-
ment is unjust. That is, particular events or circumstances are relied upon. It is
these circumstances or events which will point us to the proper law. Where a
new or domestically unrecognised unjust factor arises, the general principles
should be applied so as to determine the lex causae. The court will look towards
the circumstances and events surrounding the alleged unjust factor, or reason
for restitution, and will identify the proper law. The examination of the specific
unjust categories best illustrates how the choice of law rule operates, in the vari-
ety of circumstances in which a claim for unjust enrichment might arise.
2.1 Mistake
In cases of mistake, the plaintiff’s reason for shifting his wealth, and thus his
impoverishment, arises as a result of a mistake. That is, but for the mistake, the
plaintiff would not have made the relevant payment or provided the relevant
service. Owing to this mistake, it is unjust for the defendant not to make resti-
tution of the relevant benefit. As a general rule, the lex causae in mistake cases
will be the law of the place where the mistake occurred, namely, the law of the
place where the plaintiff acted on the relevant mistake.41 Often, this will coin-
40
In the former category, the circumstances reveal that the plaintiff did not mean the defendant to
have the particular enrichment. He either had an imperfect, a qualified or no intention to transfer
value to the defendant and therefore such circumstances render the enrichment unjust. In the case of
unconscientious receipt, the defendant’s conduct is such as to make the particular enrichment unjust.
Both these two categories essentially point to events. The law of the place with which these events have
their closest and most real connection is, it is submitted, the proper law of the unjust enrichment.
41
Mistake here covers both mistakes of fact and law. Given that we are concerned with finding
the law of the place with which the mistake has its closest and most real connection (generally the
law of the place where the mistake occurred), the question of whether the plaintiff was mistaken as
to a fact or a law is inconsequential to such an inquiry. As such, the particular law to which the
plaintiff was mistaken is as irrelevant as is, for example, the mistaken location of a recipient.
cide with the place where the relevant acts giving rise to the shift of wealth
occurred, as the mistake is the cause for the execution of the payment or service.
Thus, where a New York bank mistakenly pays a sum into the defendant’s
account with another New York bank, the defendant carrying on business in
England, the mistake will have its closest and most real connection with New
York, where the mistaken payment was made.42 Likewise, where a payer in
England mistakenly makes a payment, via telegraphic transfer, to the wrong
recipient in New York, the relevant mistake has its closest and most real con-
nection with England, where the payer mistakenly provided the English bank
with the wrong information as to the recipient. In both these examples, the place
where the mistake occurred coincides with that of the relevant acts giving rise to
the enrichment because the plaintiff was mistaken at the time he executed the
relevant acts; that is, at the time when he made the payment or when he autho-
rised his bank to transfer funds to the wrong recipient respectively.
In certain situations, the mistake will not necessarily arise in the same place
as where the shift of wealth occurred. Thus, if the plaintiff in England mistak-
enly instructs his employee to deliver goods to the wrong recipient in France, the
place where the mistake occurred is England, whereas the relevant acts giving
rise to the shift of wealth, namely the delivery of goods, arises in France. The
plaintiff acted on, or suffered from, the mistake in England.
As already discussed, there are strong commercial arguments for adopting the
law of the place where the mistake occurred.43 Banks and other financial insti-
tutions can know their position in advance in relation to inevitable mistakes.
Moreover, they can ensure that overseas payments are executed in a particular
manner so as to ensure that a particular law will apply in the event of a mistake.
Adopting the proper law of the obligation as a choice of law rule does not leave
them in a satisfactory position. They may often need to litigate to find the
proper law. Adopting the place of enrichment also fails to allow the desired level
of predictability. Over and above the problems already discussed in relation to
such a choice of law rule,44 the place of enrichment will vary depending on
where the mistaken payment, or other benefit, was received. It is precisely
because the payment was made mistakenly that it is inappropriate to apply the
law of the place of enrichment. Such a place may often be a fortuity, uncon-
nected with the place where the plaintiff acted upon the relevant mistake.
2.2 Illegitimate Pressure
The term illegitimate pressure here is used as a generic phrase to describe those
cases where restitution is granted as a result of duress or undue influence. In
42
See Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd. [1981] 1 Ch 105. See also
Barclay’s Bank plc. v. Inc. Incorporated, (1999) 242 A.R. 18 (Alberta Q.B.D.).
43
See above p.166.
44
See the criticisms of the place of enrichment as a choice of law rule discussed above: ch. 7.1.2
et seq.
such cases, it is the fact that pressure was exercised, which is considered by the
law as illegitimate, that makes the retention of the enrichment by the defendant
unjust. In cases of illegitimate pressure, the lex causae will generally be the place
where the illegitimate pressure was exercised or exerted. This will generally be
the law of the place where the plaintiff succumbed to the illegitimate pressure.
It might not necessarily coincide with the place where the defendant committed
the relevant acts which amount to illegitimate pressure.
What is important to note here is that the defendant is not being held liable as
a result of his exercising such pressure per se. Instead the defendant is made
liable to restore an enrichment as a result of his exercising illegitimate pressure
upon the plaintiff. As such, an argument along the lines that the defendant
should be made liable according to the law of the place where he committed the
relevant acts, does not hold in such cases. A defendant should be made liable to
make restitution on the basis of illegitimate pressure according to the place of
where such acts had their effect. An analogy may be drawn here with cases of
negligent misrepresentation in tort.45 The plaintiff would not have ordinarily
intended the defendant to receive such an enrichment but for the illegitimate
pressure. It is therefore just to apply the law of the place where the plaintiff suc-
cumbed to the illegitimate pressure.
In The Evia Luck (No.2),46 a Panamanian flagged vessel berthed in a Swedish
port and was informed by the International Transport Workers Federation (the
“ITWF”) that the vessel would be “blacked” unless the plaintiff owners entered
into ITWF employment contracts with the crew. In addition, the payment of
crew wages in accordance with ITWF scales, backdated to the commencement
of the employment contracts, was also demanded. Such pressure was considered
lawful under the law of Sweden, yet it amounted to illegitimate pressure, in the
form of economic pressure, under English law. The plaintiffs submitted to the
demands. Subsequently they sought a declaration that they had lawfully
avoided the contracts on the ground of duress. They also claimed restitution of
the payments made under the contracts avoided for duress.
The relevant contracts were expressed to be governed by English law, while
the parties had agreed that the consequential restitutionary claims were gov-
erned by English law as their proper law. Therefore, the specific issue before the
House of Lords was whether the contract could be avoided on the basis of
duress given that the acts of the ITWF were legitimate in Sweden. No separate
issue as to what law governed the restitutionary obligation arose, as the parties
had agreed that question of entitlement to restitution was to be governed by
English law. Nevertheless, English law would have applied as the law most
closely connected to the unjust factor. It was in England that the owners suc-
45 See for example Diamond v. Bank of London & Montreal [1979] Q.B. 333 (C.A.); The
Albaforth [1984] 2 Lloyd’s Rep. 91 (C.A.). Cf. Voth v. Manildra Flour Mills Pty. Ltd. (1990) 171
C.L.R. 538, 568–9.
46 Dimskal Shipping Co. v. International Transport Workers Federation [1992] 2 A.C. 152.
cumbed to the pressure and made the relevant payments into the ITWF’s
account.47
The example of the Evia Luck is a good one with which to analyse the poten-
tially applicable laws. Precisely because a certain type of pressure is considered
legitimate in a particular jurisdiction may be a reason for the cross-border exer-
cise of such pressure. It is not surprising that the pressure in the Evia Luck was
exercised in Sweden and not in England. It is proper that a plaintiff’s right to
recover be judged according to the law of the place where he succumbed to such
pressure, especially where this does not coincide with the place where such acts
of pressure were exercised. If however the plaintiff chose to conduct his affairs
in a particular jurisdiction and receives a particular form of pressure which is
legitimate there, he cannot complain of the legitimacy of such pressure. This is
to be distinguished from the case where a plaintiff receives pressure from juris-
diction A and succumbs to such pressure in jurisdiction B. A plaintiff who suc-
cumbs to such pressure should not be judged according to the legal rules of A
but that of B. Moreover, if the place of the enrichment rule were to apply, a
defendant such as the ITWF could direct that the payments be received in a
jurisdiction that would recognise the legitimacy of such demands.
2.3 Failure of Consideration
In cases of failure of consideration, or failure of basis,48 the lex causae will gen-
erally be the law of the place with which the failure of consideration has its clos-
est and most real connection. Cases of failure of consideration fall into two
broad categories. First, there are those cases where the failure of consideration
arises in the context of a contract which is ineffective. Secondly, there are those
cases where the failure of consideration arises outside of a contractual setting.49
In both these types of cases, the unjust factor arises because the plaintiff has
enriched the defendant on a basis which has failed. The plaintiff has provided
his side of the bargain but, in the circumstances, has not received the defendant’s
reciprocation. In cases where, for example, a contract is void or discharged, the
obligation to make restitution does not arise from the contract as such, but from
the fact that the defendant did not provide the consideration agreed upon.
The plaintiff is not suing to enforce the contract but rather is seeking to
recover the enrichment received by the defendant on the basis that, as a result of
the failure of consideration, it would now be unjust for the defendant to retain
this enrichment. As already noted, it is undesirable to have two different choice
of law rules in relation to cases of failure of consideration, depending on
47 See the judgment of the judge at first instance [1989] 1 Lloyd’s Rep. 167, 168–9.
48 Certain commentators consider the term “failure of basis” as a better phrase to describe the
unjust factor of “failure of consideration”: see P. Birks, “Restitution after Void Contracts” [1993]
U.W.A.L.R. 195; Burrows, pp.251–3.
49 See Birks, pp.219–20, 223–6; Burrows, pp.250–3, 320–1.
whether there was or there was not a contract in the factual setting.50 Both
claims are based on a failure of consideration or basis and it is therefore proper
that the same principles apply in determining the applicable law. Although a
contract may be a relevant factual setting to the claim, the actual claim revolves
around the failure of basis.
The unjust factor’s locus will be the law of the place with which the failure of
basis has its closest and most real connection. In cases where the failure of basis
is the defendant’s failure to provide an agreed reciprocation, such place is gen-
erally where the agreed reciprocation was due to be received or performed.
Thus, if one considered the relevant unjust factor in Baring Bros. & Co. Ltd. v.
Cunninghame District Council51 to have been failure of consideration, the
bank’s entitlement to restitution of the payments made under the purported
interest-rate swap agreement was to be governed by English law. The basis for
the bank’s claim was that it had made payments in relation to which the coun-
cil had failed to provide consideration, namely to make alternate payments.
Such consideration was to be received or performed in England and therefore
the unjust factor’s closest and most real connection was with England. Were it
the other way around, such that the Scottish council were suing the English bank
for its failure to make alternate payments, it is just that the claim be governed
by Scottish law as the place with which the failure of basis, or the event which
rendered the enrichment unjust, has its closest and most real connection.
Furthermore, in cases where consideration was to be received or performed in
several jurisdictions, the lex causae will be the law of the place of the principal,
or predominant, performance.52 This, it is submitted, will be the law of the
place with which the failure of basis has its closest and most real connection.
To take another example, in Etler v. Kertesz,53 a foreign exchange contract
governed by Austrian law was illegal and void under that law. The Court of
Appeal of Ontario considered that since the contract was illegal under Austrian
law, the plaintiff was not entitled to recover the moneys forwarded, either upon
the purported contract or on the basis of unjust enrichment. The Court of
Appeal’s treatment of the consequential unjust enrichment issue is most unsat-
isfactory. It did not separately characterise this issue and apply a separate choice
of law rule, nor was its decision to disallow restitution arrived at because
Austrian law dictated such a conclusion. It considered that the result followed
from the fact that the contract was illegal. Had the Court of Appeal of Ontario
separately characterised the issue of unjust enrichment, and thus proceeded to
apply the above choice of law rule, it would have been apparent that the unjust
50
See above ch. 6, §3.1.
51 The Times, 30 September 1996.
52 Guidance to this inquiry may be found from the jurisprudence of the European Court of Justice
in relation to the question of the “place of performance of the obligation in question”, in the con-
text of Art. 5(1) of the Brussels Convention. See De Bloos v. Bouyer (14/76) [1976] E.C.R. 1497;
Shenavai v. Kreischer (266/85) [1987] E.C.R. 239; Moulox IBC v. Geels (125/92)[1993] E.C.R.
I–4075.
53 (1961) 26 D.L.R. (2d) 209.
factor was a failure on the part of the defendant to provide the agreed repay-
ment. This was to be performed in Switzerland54 and thus Swiss law applied to
the separate issue of unjust enrichment. Nevertheless, even if Swiss law would
have allowed recovery, the ultimate decision of the Court of Appeal of Ontario
may have been justified on the basis that it was contrary to its public policy to
allow restitution in the case of such an illegal contract. Indeed, it was noted that,
“[t]his law is similar in its effect to the law in force in Canada . . . prohibiting
dealings in foreign exchange except through certain authorized dealers”.55
2.4 Unauthorised Transfer
The term unauthorised transfer here is used as a generic phrase to describe those
cases where restitution is effected on the basis of “ignorance”, or alternatively
on the basis of an interference with another’s interest or property. These cases
arise where, as a result of fraud, or some other form of unauthorised appropri-
ation, the value of the plaintiff’s wealth ends up in the hands of the defendant.
The important facts to keep in mind here are that, first, an actual appropriation
or interference has occurred; secondly, the plaintiff has not authorised the rele-
vant shift of wealth.
In cases of an unauthorised transfer, the relevant unjust factor is that there
has been an unauthorised interference or appropriation. It therefore follows
that, the lex causae in such cases, will be the law of the place where the relevant
interference or appropriation occurred. For example, E, an employee in England
forges his employer’s cheques and pays them into his account in England. He
subsequently withdraws the cheques making them payable to his mistress in
France. She pays them into her account in France. In an action for restitution by
the employer, the applicable law will be the law of England as the law of the
place where the relevant appropriation occurred. Likewise, if a case such as
Lipkin Gorman56 had an international perspective to it, such that Cass, the part-
ner addicted to gambling, had gambled money belonging to the partnership in
an overseas casino, the firm’s prima facie right to restitution would be governed
by English law, as the law of the place where the unauthorised appropriation
occurred. However, if the casino raised a defence akin to that of bona fide pur-
chaser for value, this would be an ancillary proprietary issue which would be
separately characterised and determined by the law applicable to the transfer of
the particular moveable, presumably that of the lex situs.57
El Ajou v. Dollar Land Holdings plc58 is another case dealing with an unau-
thorised transfer of funds. The plaintiff owned significant investments in
Switzerland. His investment manager in Geneva was bribed to invest such
54
Id., 210, 212.
55
Id., 223.
56
Lipkin Gorman v. Karpnale Ltd. [1991] 2 A.C. 548.
57
See ch. 4, §§3.4 and 5.3.1 above in relation to ancillary proprietary issues.
58 [1993] 3 All E.R. 717, reversed [1994] 2 All E.R. 685.
money in a fraudulent share selling scheme, without the the plaintiff’s author-
ity. The proceeds of the fraudulent share selling scheme were channelled
through several jurisdictions and some of these were invested in a London prop-
erty development project in conjunction with the first defendant (DLH). No
question of foreign law had been pleaded, while no evidence of foreign law was
tendered in this case. However, as the unauthorised transfer arguably occurred
in Switzerland, Swiss law should have theoretically applied to the defendant’s
liability to make restitution. This was the place where the unauthorised appro-
priation occurred, and thus, its law will be most closely connected with the resti-
tutionary liability.
2.5 Restitution for Wrongs
It has been previously submitted that restitution for wrongs cases should be
characterised as either issues of contract, breach of trust or as torts.59 They
should not be characterised as being in unjust enrichment. However, one further
advantage of adopting the choice of law rule proposed, namely that of applying
the law of the place most closely connected with the unjust factor, is that in resti-
tution for wrongs cases the same result should theoretically be reached even if
one adopted an unjust enrichment characterisation. The relevant “unjust” fac-
tor would be the fact that an alleged wrong had been committed, namely, the
defendant had become enriched by committing a wrong against the plaintiff.
Accordingly, the proper law would be the law of the place most closely con-
nected with such a wrong. As a result, the question of how such matters should
be characterised becomes one of little practical consequence.
Assuming that cases of restitution for wrongs are characterised as unjust
enrichment matters, we could then say the following. Where a plaintiff seeks
disgorgement of the defendant’s gain in connection with a tort, the applicable
law would be the law of the place where the tort was committed. Where the ele-
ments constituting the tort occurred in more than one jurisdiction, it would be
desirable to adopt a similar approach to that in the Private International Law
(Miscellaneous Provisions) Act 1995. Such torts would be said to have occurred
in the place where the most significant element or elements were committed.
Likewise, a similar approach should be adopted to equitable wrongs which are
not breaches of trust or contract. For example, in a case of knowing assistance,
the question would be to find the place connected with the relevant wrong.
Where was the wrong committed, and if it occurred in more than one place,
where did the most significant element or elements arise?
In cases of equitable wrongs which amount to a breach of trust or a fiduciary
duty, it would preferable to adopt the law most closely connected with the trust
or “contract” constituting the fiduciary relationship. If the law of the place
59
See above ch. 4.4.1 seq.
where the relevant breach occurred were to be adopted, we would arrive at a dif-
ferent law from that if the relevant issue had been characterised as a breach of
trust or contract.60 It is submitted that the law most closely connected with the
trust or contract is more appropriate to govern the issue of disgorgement than
the law of the place where the breach occurred. The latter may often be fortu-
itous.
2.6 Legal Compulsion
Legal compulsion is used here to describe cases where a person seeks restitution
in respect of payment which he was legally compelled to make. In certain situa-
tions, the law may consider that the plaintiff should nevertheless be entitled to
restitution. The compulsory discharge of another’s liability is an example.
Contribution proceedings are another. Different legal systems may provide a
different answer to the same set of facts. For choice of law purposes, the unjust
factor in these situations is legal compulsion and it identifies a legal system
rather than a place. In some situations it may be that the alleged compulsion is
not in fact legal. The unjust factor is therefore a factual compulsion, in which
case the choice of law rule must look for the law of the place with which the
compulsion had its closest and most real connection.
Where someone discharges another’s liability in circumstances where he was
legally compelled to do so, the person whose liability was discharged may be
unjustly enriched at the expense of the payer. The legal system under which the
plaintiff was compelled to make the payment should be the applicable law to
govern restitutionary liability. After all, given that the particular demand was
lawful, restitution should only follow where it is allowed by the same legal sys-
tem. This will be the legal system with which the facts surrounding the plain-
tiff’s alleged compulsion have occurred or are most closely connected.61 It
should determine, for example, whether the plaintiff’s right of restitution
requires the defendant to be primarily liable and not merely liable in the same
degree. It will also determine whether the plaintiff is entitled to restitution in
relation to the entire amount paid or merely in relation to his degree of liability.
It is difficult to envisage cases where the elements for a compulsory discharge
of another’s liability will have much connection with a legal system other than
that which compelled the plaintiff to make the payment. For example, a
Canadian defendant may have exported goods to England which are stored in
the plaintiff’s warehouse. The goods are stolen, yet the plaintiff is nonetheless
obliged under the Customs Act to pay the import duty to customs.62 The plain-
tiff’s right of recovery from the defendant in respect of the duties so paid will be
60
See above ch. 4.4.3 seq.
61
See Goff and Jones, The Law of Restitution (London, 1966), p.506.
62
This example is based on Brook’s Wharf & Bull Wharf Ltd. v. Goodman Bros. [1937] 1 K.B.
534.
governed by English law, as the compulsion arose under English law, or had its
closest and most real connection with England. This will be despite the fact that
the defendant was arguably enriched in Canada. A more difficult question might
arise in the situation where two English joint-owners of a property in France are
jointly and severally liable for certain local rates. The plaintiff discharges the
entire amount due. Should his right of recovery be governed by English or
French law? The plaintiff was legally compelled to make the payment under
French law and thus French law has the closest and most real connection with
the event which rendered the payment unjust. Therefore, French law should
govern the right of restitution.63 Nevertheless, it might be argued that as both
parties are English, the rights between these two parties should be determined
under English law. The existence of a property in France is coincidental and thus
an exception should possibly apply. An analogy might be drawn with Boys v.
Chaplin.64 A tort committed between two British servicemen in Malta should
nevertheless be governed by English law as an exception, as there is no reason
why one should deny the application of English law to the parties. However,
unlike the cases of tort, in the example cited French law is far more connected
with the rights of the parties than the circumstantial locus of a tort. After all, it
is French law that compelled the plaintiff to discharge the entire liability and
thus made this a prima facie unjust enrichment. The right of restitution should
accordingly be determined under French law.
In Nominal Defendant v. Bagot’s Executor & Trustee Company Ltd.,65 a
party injured in a motor vehicle accident successfully brought an action against
the Nominal Defendant of New South Wales. The Nominal Defendant then
brought proceedings in South Australia against the executor of the driver seek-
ing reimbursement. Bray C.J. held that the executor’s liability to the Nominal
Defendant was governed by the law of New South Wales on the basis that it was
“the place with which the circumstances giving rise to the obligation [had] the
most real connection”.66 A closer analysis reveals that the Nominal Defendant
of New South Wales was obliged to compensate the injured party for his loss
under the law of New South Wales. Therefore, it was correct that the issue of
the Nominal Defendant’s right of restitution, against the party whose liability
had been discharged, be governed by the law of New South Wales. This was the
law with which the circumstances had their most real connection because the
plaintiff had been legally compelled to discharge the defendant’s liability under
New South Wales’ law.
63
This is the view Goff and Jones come to in an almost identical example given in the first edi-
tion of their book, where they devoted a chapter to the conflict of laws: Goff and Jones, The Law of
Restitution (London, 1966), p.506.
64
[1971] A.C. 356.
65
Nominal Defendant v. Bagot’s Executor & Trustee Company Ltd. [1971] S.A.S.R. 346, see also
ch. 5, §5.
66
Id., 366.
Another example of legal compulsion is in the field of contribution. A partic-

ular worker insured in, for example, Victoria, is insured for workers’ compen-
sation liabilities through a Victorian insurer. He is also insured against public
risks through an insurer in England. The contracts are expressly governed by
Victorian and English law respectively. A particular event occurs which falls
within the risks insured under both policies, thereby entitling the insured to
recover under either policy. The insured chooses to recover under the English
public risks’ policy and not the workers’ compensation policy. This discharges
the Victorian insurer’s liability. The English insurer seeks contribution in rela-
tion to its payment. It argues that its payment has unjustly enriched the defen-
dant insurer in that it is no longer obliged to pay the insured. It therefore seeks
a contribution in relation to the proportion of the loss which its insurance bears
to the aggregate amount insured by both policies. Assuming that such a contri-
bution claim is unavailable under Victorian law, or that it would, for example,
make the contributions between the insurers equal, even though the Victorian
insurer had insured for a greater sum, a question will arise as to what law gov-
erns the right of contribution. The liberal lex fori will presumably characterise
this as an issue of unjust enrichment,67 even though it might not strictly amount
to such a claim as a matter of domestic law. The English insurer was compelled
to make this payment under a contract governed by English law; its right to
restitution should also be governed by English law. The Victorian insurer can-
not complain about the fact that Victorian law was not applied to its restitu-
tionary liability, as the law of its insurance contract. It has had its liability
discharged through the operation of English law compelling the English insurer
to make the relevant payment. Similarly, if matters were the other way around,
such that the Victorian insurer had paid out first and was now seeking contri-
bution from the English insurer, it is appropriate that Victorian law now apply,
as the law which compelled the Victorian insurer to make the payment. The
Victorian insurer would ordinarily not have had an entitlement to a contribu-
tion, or to as generous a contribution. It made its payment under a contract of
insurance which was governed by Victorian law. Why should it now be entitled
to claim the operation of English law merely by virtue of the fortuity that the
other insurance contract happened to be governed by English law?
In Arab Monetary Fund v. Hashim (No.9),68 Chadwick J. held that a contri-
bution claim brought in relation to a liability under the Civil Liability
(Contribution) Act 1978 (the “Act”) is sui generis and therefore the availability
67 See Dicey and Morris, pp.1488, 1533; A. Briggs, “The International Dimension to Claims for
Contribution” [1995] L.M.C.L.Q. 437; Stevens, p.209; Nominal Defendant v. Bagot’s Executor &
Trustee Company Ltd. [1971] S.A.S.R. 346, 365, per Bray C.J; reversed on other grounds (1971) 125
C.L.R. 179; Stewart v. Honey [1972] 2 S.A.S.R. 585, 592, per Bray C.J.; Hodge v. Club Motor
Insurance Agency Pty. Ltd. [1974] 22 F.L.R. 473, 477, per Bray C.J. Cf. Plozza v. S.A. Insurance Co.
[1963] S.A.S.R. 122, 127; Baldry v. Jackson [1977] 1 N.S.W.L.R. 494; Lucas v. Gagnon (1992) 99
D.L.R (4th) 125, 137–8, per Tarnopolsky J.A., 141–2, per Carthy J.A., reversed but on different
grounds (1994) 120 D.L.R. (4th) 289 (S.C.C.).
68 The Times, 11 October 1994.
of such a claim is a question of statutory interpretation.69 Its availability does

not depend on whether, under the rules of private international law, the contri-
bution claim is governed by English law so as to allow a claim under the Act.
Instead, the question to be asked is “whether under the rules applicable in an
English court, which include the provisions of the Act itself, the contribution
claim ought to succeed”.70 Effectively, this means that so long as the court has
jurisdiction over the defendant, the Act permits and requires it to order contri-
bution in accordance with the Act. This decision has received academic criti-
cism71 and is also contrary to the views expressed by the Law Commission.72
If Arab Monetary Fund v. Hashim (No.9) is correct, then choice of law ques-
tions only arise in relation to contribution claims which fall outside the scope of
the Act.73 However, it is submitted that this decision is wrong and that where an
English court has jurisdiction to hear a contribution claim it should not auto-
matically apply its own domestic law to the issue without regard to choice of
law.74 First of all, there is no indication in the Act that it is to apply notwith-
standing any international elements which may be present in a contribution
claim. Given the absence of any intention to the contrary, the Act must be pre-
sumed to define the rules of English domestic law.75 The question of applicable
law in the context of a particular contribution claim is beyond the scope of the
Act, one that is to be determined by the rules of English private international law
and in particular the restitutionary choice of law rule. Secondly, it cannot be
said that a contribution claim is a matter of procedure, and not of substance, to
be automatically governed by the lex fori. Moreover, such an argument is incon-
sistent with Chadwick J.’s view that where a claim for contribution falls outside
69 In support of this approach see also Plozza v. S.A. Insurance Co. [1963] S.A.S.R. 122, 127;
Nominal Defendant v. Bagot’s Executor & Trustee Company Ltd. [1971] S.A.S.R. 346, 356, per
Bright J.; Cf. Stewart v. Honey [1972] 2 S.A.S.R. 585, 592, per Bray C.J.
70 Transcript, 11.
71 A. Briggs, “The International Dimension to Claims for Contribution” [1995] L.M.C.L.Q. 437.
See also R. Stevens, “The Choice of Law Rules of Restitutionary Obligations” in F. Rose (ed.),
Restitution and the Conflict of Laws (Oxford, 1995), p.210; C. Mitchell, “The Civil Liability
(Contribution) Act 1978” [1996] R.L.R. 27, 52.
72 Law Com. W.P. No.75 (1980), paras. 7378; Law Com.W.P. No.87 (1984), para. 2.83.
73 The scope of the Act is quite broad. The claimant and the contributor must both be liable “in
respect of the same damage (whether jointly . . . or otherwise)”: s.1(1). Such liability is not limited
to tort but extends to “whatever the basis of . . . liability, whether tort, breach of contract, breach
of trust or otherwise”: s.6(1). The liability may, therefore, not only be owed by a tortfeasor, but also
a trustee, a partner or an independent contractor whose act causes damage “to another person”. It
has even been held that liability extends to a claim for restitution: Friends’ Provident Life Office v.
Hillier Parker May & Rowden [1997] Q.B. 85, 102, per Auld L.J; but Cf. Goff and Jones, pp.395–7.
It does not extend to situations where the parties are jointly liable for the same debt, nor does it
extend to situations where the liability is in the form of a penalty, tax or other public liability:
Customs and Excise Commissioners v. Bassimeh [1995] S.T.C. 910, 919. It is unclear whether the
Act applies to contribution claims between co-sureties or between indemnity insurers: Goff and
Jones, p.397; Mitchell, op. cit., p.29.
74 See also A. Briggs, “The International Dimension to Claims for Contribution” [1995]
L.M.C.L.Q. 437.
75 On the interpretation of statutes and the conflict of laws, see generally Dicey and Morris,
pp.16–18.
the scope of the Act, it is governed by its proper law.76 Thirdly, the preferred
view is that an issue arising under the Law Reform (Contributory Negligence)
Act 1945 is one of substance, and should therefore be governed by the law
applicable to the main claim.77 Given that the wording of the two statutes is sim-
ilar, a consistent approach is called for.
Finally, applying the law of the forum to contribution matters, notwith-
standing the law applicable to the primary liability owed, cannot be said to
always reach the most just result. For example, D1 is an American car manu-
facturer. One of its vehicles is rented out to D2, an English tourist holidaying in
Greece. While driving such vehicle, D2 injures P. The accident was largely due
to D2’s careless driving but also partly due to certain manufacturing faults in the
vehicle. If one had to apportion fault, D2 was ninety per cent whereas D1 was
only ten per cent to blame. P brings a successful claim against D1 in the courts
of Greece and D1 is held liable in respect of P’s loss. D1 now brings a contribu-
tion claim against D2. Suppose that under Greek law, no consequential contri-
bution claim may be brought, or that a contribution claim would automatically
apportion liability equally. Why should D1 have the advantage of the more gen-
erous English contribution law in a case where, its initial liability is governed by
Greek law and, its contribution claim is not connected with England other than
it being the defendant’s domicile? It is submitted that it is proper for the law
which determines liability to also determine the question of contribution and
that such a matter should not depend on the fortuity of venue. Such an approach
encourages forum shopping.
To alter the facts a little, suppose that proceedings where brought against
both D1 and D2 and the Greek court held that D1 was not liable to P, in cir-
cumstances where the English courts would have held the contrary.78 Would it
be correct to suggest that D2 should nevertheless be entitled to a contribution
claim against D1 merely on the basis that the claim falls within the scope of the
Act? If the contribution claim by D2 were governed by Greek law, being the law
which compelled D2 to make the payment which allegedly enriched D1, such a
problem would not arise. It is therefore submitted that contribution claims are
issues of substance whose applicable law is the law which compelled the person
seeking contribution to make the relevant payment, namely, the law which
made him liable.
76 Transcript, 29.
77 Dicey and Morris, pp.1527–8; P. North (1967) 16 I.C.L.Q. 379; C. Morse, “Torts in Private
International Law” (Amsterdam, 1978), pp.180–1; also Briggs, op. cit., 439.
78 This it is suggested might occur by reason of a different choice of law rule.
2.7 Ultra Vires Payments
A plaintiff may be entitled to restitution where moneys are paid pursuant to an

ultra vires statute, regulation, or other unlawful public demand.79 In such a case
the relevant unjust factor is the fact that the demand was ultra vires and thus the
payment was not owing. This is clearly illustrated in Woolwich Equitable B.S.
v. I.R.C.,80 where the building society paid the relevant tax even though it con-
sidered it invalid. Accordingly, the payment could not be said to have been made
under a mistake. Nevertheless, the House of Lords held that the building soci-
ety was entitled to restitution in such circumstances because where a public
authority receives a payment pursuant to an unlawful demand, it is unjustly
enriched.
The unjust factor here has its closest and most real connection with the law
that determines the lawfulness or otherwise of the public demand. Thus, the
right to restitution will be governed by the law that has determined the ultra
vires nature of the relevant law or demand. This is appropriate for a number of
reasons. First, restitution can only follow where the demand is ultra vires.
Secondly, it is appropriate that the public body be liable to make restitution in
accordance with the law that made its law or demand ultra vires. Thus, if a
defence of “passing on” is recognised under its law,81 it should be entitled to
such a defence. Thirdly, the question of whether the relevant public body has
available a defence that it changed its position, and its extent, should be deter-
mined under the same law.
2.8 Illegality and Incapacity
There may be situations where a contract or other transaction is rendered void

by operation of law, for example, due to illegality or incapacity. A consequent
claim in unjust enrichment may be brought, not on the basis of failure of con-
sideration but, because the legal system which rendered the contract void specif-
ically allows for such a claim. In such cases, the law which rendered the contract
void should also govern the consequential restitutionary claim. For example,
suppose an Australian insurer agrees to insure a Singaporean assured. The con-
tract of insurance is expressed to be governed by the law of England. Let us
79 See for example Woolwich Equitable B.S. v. I.R.C. [1993] 1 A.C. 70; British Steel Plc v. C.&E.
Commissioners [1997] 2 All E.R. 366 (CA). See also Air Canada v. British Columbia (1989) 59
D.L.R. (4th) 161; David Securities Pty Ltd. v. Commonwealth Bank of Australia (1992) 175 C.L.R.
353; Commissioner of State Revenue (Victoria) v. Royal Insurance Australia Ltd. (1994) 182 C.L.R.
51; SCI Operations v. Cwth of Australia (1996) 139 A.L.R. 595.
80
[1993] 1 A.C. 70
81
This defence will deny restitution where the relevant taxpayer passed on the cost of a tax to
consumers and thus was not impoverished: see Air Canada v. British Columbia (1989) 59 D.L.R.
(4th) 161; Cf. Commissioner of State Revenue (Victoria) v. Royal Insurance Australia Ltd. (1994)
182 C.L.R. 51.
assume that under Australian law, it is illegal for insurers to enter into contracts
of insurance of that particular nature. After the insured period, it is established
that the contract of insured was in fact illegal and therefore void under its
proper law. The assured claims restitution of the premiums. Let us further
assume that under English law, there is no right to restitution as there has been
no failure of consideration, while under Australian law however, restitution is
allowed merely by virtue of the fact that the insurance contract was void. It is
submitted that the right to restitution is governed by Australian law, being the
law which rendered the contract void on the basis of illegality. It should be
stressed that the unjust factor here is not failure of consideration.
Suppose a Scottish local council enters into a swap agreement with an English
bank.82 The contract is ultra vires the council and thus void due to the council’s
incapacity. Although the swap is completed, one of the parties brings a claim
seeking restitution of the overpayments made by it. The claim here is not
brought on the basis of failure of consideration as the swap has been completed;
there has been no failure of basis. The unjust factor here is incapacity,83 which
arises under Scottish law. Therefore, the issue of restitutionary liability must be
determined under Scottish law.
TABLE 2: Summary of circumstances giving rise to restitution(unjust factors for choice

of law rule purposes) and the type of choice of law rule applicable
Unjust Factor Law of the Place Rule Legal System most

Rule closely connected
Mistake
Illegitimate Pressure
Failure of Consideration
Unauthorised Transfer
Restitution for Wrongs
Legal Compulsion
Ultra Vires Payments
Illegality and Incapacity
3 UNJUST AND UNJUSTIFIED
There is a final matter which must be considered. Although the law of unjust
enrichment under most common law systems is based around specific unjust
factors or categories, this is not necessarily the case under other legal systems.
82 See Baring Bros. & Co. Ltd. v. Cunninghame District Council, The Times, 30 September 1996;
Kleinwort Benson v. Glasgow City Council [1999] 1 A.C. 153.

83 See A. Dickinson, “Incapacity and Choice of Law” [1997] R.L.R. 66, 70–1; see also Dicey and
Morris, p.1496.
Specifically, under many civilian systems this subject is the law of unjustified
enrichment.84 An enrichment is reversible where it is received without legal
cause.85 At first sight, this may seem to pose a problem. Where an English court
is faced with a claim for unjust enrichment, said to be governed by German law
for example, how is it to determine the unjust factor? Although such foreign
claims will not be based around a specific unjust factor as a matter of law, they
will as a matter of fact. There will be a reason as to why the relevant enrichment
is unjustified which will accord with an unjust factor. There will be an alleged
mistake, duress, failure of consideration or other event of the sort described
above which, in the circumstances, makes the enrichment without legal cause
and therefore gives rise to a claim in restitution. Enrichment is unjustified in spe-
cific categories of cases or circumstances under civilian systems as it is under
English law.86 This is apparent when one considers the origins of the civilian law
of unjustified enrichment in the Roman condictiones.87 These were specific cat-
egories of claims which roughly square up with the unjust factors.
The way a court should proceed is as follows. When applying the choice of
law rule to an international restitutionary claim, the court should do this inde-
pendently of any particular legal system. After all, the purpose of applying a
choice of law rule is to arrive at the applicable law. It should ask itself the rea-
son why it is alleged that the particular enrichment should be reversed; that is,
it should identify the unjust factor. The relevant unjust factor will point the
court to the lex causae, pursuant to which it may determine the plaintiff’s claim
to restitution. Under this process, it is inconsequential whether the law ulti-
mately applicable recognises specific unjust factors or not. The unjust factor
here is a connecting factor which guides the court to the applicable law, it is not
a legal pre-requisite.
The German decision of the Bundesgerichtshof, concerning the minor’s flight,
may be used as an illustration.88 In that case, the defendant joined the transit
passengers in Hamburg and entered a plane for a flight to New York without
84 Hobhouse J. and Dillon L.J. in Westdeutsche Landesbank Girozentrale v. Islington L.B.C.
[1994] 4 All E.R. 890 and the Court of Appeal in Guinness Mahon & Co. Ltd. v. Kensington L.B.C.
[1998] 2 All E.R. 272 put forward “absence of consideration” as a basis for restitution; Cf.
Westdeutsche Landesbank Girozentrale v. Islington L.B.C.[1996] A.C. 669, 683. This has been
strongly criticised and is inconsistent with the general English law of restitution: see Goff and Jones,
pp.500–2; P. Birks, “No Consideration: Restitution after Void Contracts” (1993) 23 U.W.A.L.R.
195; A. Burrows, “Swaps and the Friction Between Common Law and Equity” [1995] R.L.R. 15;
P. Millett (1998) 114 L.Q.R. 395, 414.
85 See ch. 1.2.3.
86 German law draws a distinction between enrichment by performance and enrichment in
another way. Where performance is “undone”, it will be based on a factor akin to the unjust factors
under English law. Likewise performance in another way covers both restitution for wrongs and
ignorance or unauthorised transfers of wealth. Moreover, the provisions in the German civil code
recognise several special condictiones: see Markesinis, pp.713–20, 725–31. Stathopoulos recognises
specific categories of, or circumstances giving rise to unjustified enrichment under Greek law: see
Stathopoulos, pp.337–40.
87 See Zimmerman, ch.26.
88 BGH 7 January 1971, N.J.W. 1971, 609 (Markesinis, p.771).
being in possession of a valid ticket for this journey. Having been refused entry
into the U.S., the plaintiff air-carrier agreed to carry the defendant back to
Germany on the basis that the defendant sign a document acknowledging that
he owed the plaintiff US$256. The agreement was unenforceable under German
law, as the defendant’s mother, as his statutory agent, refused to grant consent
to legal transactions concluded between the defendant and the plaintiff.
Assuming that the plaintiff air-carrier was not German, say for example British,
and that the unenforceable agreement provided that the payment was to be
made in Germany upon the defendant’s return, the question may arise as to the
law applicable to the plaintiff’s claim for unjustified enrichment.
First of all, the issue of the alleged contract’s validity would be a separate con-
tractual issue, to be determined by the law applicable to the contract.89
Assuming that under the lex contractus the contract was unenforceable, the
claim for unjustified enrichment would be characterised as raising an issue of
unjust enrichment. The reason for restitution here, or the alleged unjust factor,
is failure of consideration; that is, the minor was allowed to fly back on the basis
that he would pay the specified sum. This was to be paid back in Germany. The
failure of consideration, namely the failure to make the payment occurred in
Germany, or is most closely connected with Germany. Thus, German law
should govern the issue of restitution.
Certain observations need to be made here. German law would not consider
there to be an “unjust factor” of failure of consideration. In fact, a German court
would consider the enrichment of the minor as unjustified on the basis that given
the contract’s unenforceability, it was without legal cause. Yet, for the purposes
of identifying the lex causae, the English court can look at the particular claim
and objectively identify the alleged “unjust factor” or reason for restitution.
Having done this, it can identify the legal system with the closest and most real
connection to the alleged unjust factor. It should also be observed that the lex
causae of the restitutionary issue, applies irrespective of the law applicable to
the related, unenforceable contract. The applicable law to the unjust enrichment
is determined by identifying the legal system most closely connected with the
alleged reason for restitution and not by deferring this question to the law of a
related contract, whose applicable law is not necessarily connected with the
alleged duty to make restitution.
89 See ch. 4.1.2.

Part III Chap 3

Uploaded by

Copyright:

Available Formats

Part III Chap 3

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Part III Chap 3

Uploaded by

Copyright:

Available Formats

Panagopoulos, George. "Preferred Choice of Law Rule." Restitution in Private International Law.

Downloaded from Bloomsbury Collections, www.bloomsburycollections.com, 17 June 2022,

Access provided by: Damodaram Sanjivayya National Law University

level, it can be said that matters of unjust enrichment are

situation is largely based on practical and policy considerations in the ascer-

Foundations of Tort Law (Oxford, 1995) pp.31, 37–45.

Commission No. 193, Choice of Law in Tort and Delict (1990).

loss arises.23 As the statement is directed to a recipient, it is, in substance, made

(1976) 120 Sol. Jo. 690.

the place of enrichment rule.38 It is arbitrary; it gives a deceptively simple locus,

2 DETERMINING THE PROPER LAW OF THE UNJUST FACTOR

38 See above ch. 7.1.2 et seq.

2.2 Illegitimate Pressure

2.3 Failure of Consideration

2.4 Unauthorised Transfer

2.5 Restitution for Wrongs

2.6 Legal Compulsion

Another example of legal compulsion is in the field of contribution. A partic-

of such a claim is a question of statutory interpretation.69 Its availability does

2.7 Ultra Vires Payments

A plaintiff may be entitled to restitution where moneys are paid pursuant to an

2.8 Illegality and Incapacity

There may be situations where a contract or other transaction is rendered void

TABLE 2: Summary of circumstances giving rise to restitution(unjust factors for choice

Unjust Factor Law of the Place Rule Legal System most

3 UNJUST AND UNJUSTIFIED

Kleinwort Benson v. Glasgow City Council [1999] 1 A.C. 153.

84 Hobhouse J. and Dillon L.J. in Westdeutsche Landesbank Girozentrale v. Islington L.B.C.

89 See ch. 4.1.2.

You might also like