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Steve Hedley
Tue, 23 Dec 1997 10:53:23
failed contracts and restitution


I assure members of the group that the following is not a bogus attempt to stir up further controversy by faking e-mail, but is actually a forwarded message from Gerard McMeel, intended for this discussion list.

The main lines of the reply I would draft but for my holiday plans are that

1/ I am happy to use some other label than "restitution enthusiast" for those who apply the approach to Restitution promoted in Birks' "Introduction to Restitution", but have noticed a tendency to deny the reality of this phenomenon. It is rather as if someone described Harriet Harman or David Blunkett as "Labour supporters" and they then complained of being typecast !


2/ I have never urged *ignorance* of restitution as desirable, and am no more guilty of promoting it than is anyone else on this list.



It is interesting to see such controversy sparked by the certainties of a former Bristol student and, I'm sure "atypical" member of the Bar/

I have written elsewhere of my views of the location of rescission in the legal map, and have been typecast as a "restitution enthusiast" by Steve as a result!

I was concerned by Steve's remark about typical members of the (I presume English) Bar, especially by the idea that this construct (whose education in the law of obligations was confined to Contract and Tort) should control our legal thinking. Should such a creature exist, there is a danger he could overlook potential remedial solutions for his clients. In reality , recent reported cases suggest increasing familiarity with restitutionary literature, both cases and juristic writings. However in my experience solutions are overlooked due to unfamiliarity.

Take one example:

Can a negligent insurance intermediary retain the premium?

Suppose a broker takes the client's cheque and instructions to insure immediately. The broker is dilatory and a risk eventuates with no cover The insured can recover damages from the broker equivalent to the indemnity. Can he also have his money back which has never been applied for the intended purpose?

Dr Clarke in the Law of Insurance Contracts says he can (albeit as an element of damages) and cites CA in Osman v Ralph Moss (1977)(in fact the issue is not explicitly discussed there).

There is a counter-argument that by suing the broker for damages the client "affirms" the contract and cannot have both restitution and damages (reasoning similar to the HCA in The Mikhail Lermontov, brilliantly criticised by Barker in 1993 LMCLQ)

However the client did not bargain for no cover and to be left to the tender mercies of litigation against the broker. A prudent client when he discovers the gap will effect insurance elsewhere for the remainder of the term. Further, the agent received the money in a fiduciary capacity for one purpose only, to which it has not been applied

On balance I think most English courts will include the sum in the damages or will award rest. on the basis of a total (or sometimes perhaps partial failure) of consideration, oblivious of any theoretical difficulties (as happened in the sale of goods context in Rogers v Parish ).

However I know a lot of practitioners who disagree. Any views?

Apologies for the poor quality of this message - I am logging in from a remote terminal and I cannot revise the text.


Gerard McMeel
(University of Bristol)

Supreme Court

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