by Francesco Giglio*
- Chapter One: Introduction
- Chapter Two: Proprietary Wrongs
- Chapter Three: Intellectual Property Wrongs
- Chapter Four: Breach of Contract
- Chapter Five: Other Wrongs
- 1. English Law
- 2. German Law
- 3. Italian Law
- Chapter Six: Concluding Observations
The present paper seeks to give a comparative overview of restitution for wrongs in three legal systems which deal with that institution from quite different perspectives. The terms “restitution for wrongs”, “restitutionary damages”1 and the like belong mainly to the terminology of the modern common law. The civil lawyer is not at ease with them. He will probably not understand their meaning. And if he does understand, most likely he will reject the idea as alien to the law of damages as it is traditionally conceived in the civil law systems. Indeed, the German and the Italian law of damages are primarily based upon the concept of compensation: in those systems the function of the law of damages is almost exclusively seen as making good the loss suffered by the victim of a wrong. Consequently, the idea that the law of damages could also be used to compel the wrongdoer to give up to the victim the profits derived from the perpetration of a wrong seems to be prima facie incompatible with these premises. Yet, as the present analysis will show, there are some signals which indicate that it an outright rejection of a notion of restitution for wrongs is not justified from an academic viewpoint.
This comparative study is based upon a set of assumptions which, regardless of how well they might fit to the perspective of the national systems under consideration, nevertheless emerge clearly in the legal comparison.
The starting point of the present analysis is the definition of restitution as the response which consists in causing one person to give up to another an enrichment received at his expense, or its value in money2. This is a neutral formula which can be applied to every area within the law of obligation. For instance, restitution is possible in contract, as in the Italian case of dissolution of a contract of sale, in which Art. 1493 c.c. provides that the buyer must give up 3 to the seller the object which had been sold. Ever since the decision of the House of Lords in Lipkin Gorman v Karpnale Ltd4, there is no doubt that the law of unjust enrichment has received judicial recognition as an area of English law and that it is based upon restitution.
Within the law of obligations, a “right to restitution” is a right to obtain a gain made by the other party to a contract, by an unjustly enriched party, or by a wrongdoer. When the latter is the case, i.e. when a victim of a wrong is awarded the right to obtain a gain made by the wrongdoer, the courts award restitution for wrongs. More precisely, the term “restitutionary damages” means an award, normally of money, calculated so as to effect restitution of gains accruing to the wrongdoer from his wrong.
For the reason given, it should be stressed that the “law of restitution” and the “law of unjust/unjustified enrichment” are not synonyms. They do not even belong to comparable categories5. “Unjust enrichment” is the category which qualifies an event to which the law attaches a given response. This response is, necessarily, restitution. The same response can be attached to other events, viz . contract and tort. Yet, unlike unjust enrichment, contract and tort are characterised by a heterogeneity of responses, whereby compensation, restitution and punishment are the most common.
“Restitution for unjust enrichment” and “restitution for wrongs” have their roots in different areas of the law of obligations. The requirements for causes of action in enrichment and in tort to accrue are dissimilar because the two institutions aim at different targets. The difference between restitution for unjust/unjustified enrichment and restitution for wrongs can be better understood by pointing out that only the latter is a wrong-based response to an enriching event. However, both responses share a restitutionary function; they are both part of the “law of restitution”.
The traditional view of English law is that a wrong is a breach of a duty owed to “persons generally”6. For their part, civil lawyers see delicts as unlawful violations of general legal relations between persons7. The major difference is the perspective from which such breaches/violations are analysed: duties broken by the wrongdoer for the common law, violated rights of the victim for the civil law. This does not have a great impact on the topic under examination in this paper because both indicate some sort of wrongful behaviour categorised as a hazard for society.
Yet, as we shall see, common lawyers tend to admit that breach of contract is a wrong8. As has been said, “although breach of contract cannot be considered to be of the same magnitude of wrongfulness as committing a tort or crime or even a breach of fiduciary duty, it is wrongful, as has been recognised for the purposes of economic duress”9. This quote illustrates the level of care which English lawyers take when qualifying breach of contract under the category “wrongs”. This suggests a distinction between different grades of wrongfulness which is taxonomically incorrect: breach of contract can be a wrong or not, but it cannot be “less” a wrong than other wrongs, tertium non datur. This kind of prudent approach is alien to civil lawyers, who found the exclusion of breach of contract from the law of delicts on the want of generality which characterises the breach in question: this does not engender the violation of a “social interest” because only a very specific group has an interest in the performance of the party in breach10. Hence, from the very beginning the contractual relationship affects only the parties to it, whereas a delict is an offence against the whole of society. Yet generality appears as a requirement in both the aforementioned definitions of wrongs and delicts; how can the outcome be so different?
A plausible answer could be that the original meaning has been developed in English law up to a point at which its essence has changed. The requirement of generality has gradually disappeared from the basic definition which in its most recent form can be read thus: a wrong is the breach of a duty. If “wrong” is defined as a breach of duty without any further qualification, its meaning is greatly enlarged: torts, equitable wrongs and breach of contract all find their cause in a breach of a duty, be it a duty owed to society, or to the other contracting party.
A category of “wrongs” intended as breach of duty does not exist in civil law. This is why the question of the possible delictual character of a breach of contract, if raised, is dismissed in both of the civil law systems under comparison. Thus, an analysis of restitution for delicts conducted from the perspective of, say, German law would ignore breach of contract. From the same perspective, an analysis of restitution for wrongs would hardly be conceivable, because German or Italian lawyers would consider “wrongs” to have the same meaning as “delict”.
If this is true, the avenues of common law and civil law diverge at this point. The English concept of a wrong is no longer equivalent to the German and Italian. Rather, the former contains the latter: German and Italian law specify that the unlawful behaviour must be towards society, whereas English law seems to require a mere “breach of duty” without further qualifications. The question arises whether, on this changed basis, legal comparison as regards restitution for “wrongs” is still possible. This articles takes the position that such a comparison can be made. Legal comparison needs a uniform definition which allows at least the possibility of conducting research on the same ground in all of the systems under examination. This result is reached here by setting the following premise: the analysis pursued in this paper will only work with a definition of wrong as it emerges from the aforesaid most recent development in English law. On this basis, the research will seek to find out whether there is room for a recognition of a response which deprives the wrongdoer of the benefit accruing to him as a consequence of a breach of duty on his part.
Under this premise, a qualification of the topic as “restitution for ‘wrongs'” appears to be most satisfactory from a comparative point of view and most precise as far as legal theory is concerned. In particular, accepting such a large definition of wrong makes it possible to include the German and Italian positions on restitution for wrongs as a consequence of breach of contract.
Thus, in the terminology adopted in this paper, “tort”, “equitable wrongs”, de”lict” and “breach of contract” are distinct categories which belong to the same genus “wrongs”. Lawyers in England as well as German and Italy find such a categorisation difficult to accept, albeit for different reasons.
That civil torts and equitable wrongs are seen by the majority of English lawyers as different legal institutions pertaining to different fields of law becomes clear by even a superficial analysis of textbooks on torts and equity: the former deal only with civil torts11, the latter solely with equitable wrongs12.
In fact, it is widely recognised13 that the main reason for classifying torts and equitable wrongs as different legal responses is the divide between common law and equity, which nowadays has mainly historical significance. Despite this, the divide between the two institutions still remains wide14. Even after the wall between law and equity was torn down, this separation has survived15. A similar situation also can be traced in judicial opinions. Some authority appears more inclined to grant some sort of restitutionary response for breach of equitable duty than for pure tortious liability16.
Even civil lawyers have some difficulties in seeing delict and breach of contract as sharing the same roof. Traditionally, the law of delict has dealt with delicts and the law of contract with breach of contract. This has happened mainly for the reason given, i.e. that the commission of a wrongful act triggers a delictual response only it concerns the breach of a duty owed to persons generally. In the absence of a further category of wrongs stemming from equity – for equity as it is understood by English lawyers is not known in Roman-rooted legal systems – it appears that no attention has ever been paid to a generic category under which different models of breach of duty could take place. What is more, the two civil law systems under consideration17 examine delicts from the point of view of the infringed rights of the claimant, rather than from the violation of a duty on the part of the defendant. Therefore, the concept of a wrong as a “breach of duty” without further qualifications has never been developed in Italian or German law.
There is little doubt that the degree of acceptance of restitutionary damages has changed over time, and that this acceptance depends largely on the prevailing interpretation18 of the role of compensation. It seems that the position of restitution for wrongs within the legal system cannot adequately be explained by mere infrasystematic analysis: legal comparison can help to clarify the general picture which, examined in the light of only a single legal order, can appear quite blurred.
The question which will be answered in this article has been formulated in very broad terms. It is related to the prospect of a transplant of restitution for wrongs into the systems under comparison: is there any element which would support the introduction or, indeed, the presence of this kind of damages? In other words, despite the apparent hurdles, are these three legal systems ready to cope with restitution for wrongs? To answer this question, it must first be considered whether instances of restitution for wrongs already exist in the systems discussed here. This is the issue which will be discussed in the following.
Legal comparison shows that, in response to the perpetration of a wrong, legal systems utilise, more or less consciously, structures through which a transfer of wealth from the defendant to the claimant is realised which goes far beyond mere compensation of the victim. Furthermore, there are rights arising from wrongs which are in no way related to any loss of the claimant, but are based exclusively on the gain made by the defendant through his wrongdoing.
For analytical purposes, the topic will be now deconstructed into four categories, a classification which fits, to varying extents, all three systems under consideration. The classificatory model used for this purpose owes much to the work of the Law Commission on this matter (see note 1).
The categories are the following: proprietary wrongs (excluding intellectual property wrongs); intellectual property wrongs; breach of contract; other wrongs. This categorisation takes little account of the historic divide between (common law) torts and (equitable) wrongs. The class “other wrongs” takes into account the fact that all classifications are as imperfect as the minds of those who formulate them. “Other wrongs” thus includes all cases of wrongful violations of rights which do not fall into the further, more detailed headings. It should be noted, though, that no attempt will be made to analyse all possible instances of restitution for other wrongs; rather, only a few interesting examples will be presented. This method allows us to avoid a proliferation of ad hoc categories for every single wrong which does not belong to the three previous headings. “Breach of contract” will be analysed before “other wrongs” because ex hypothesi breach of contract is a wrong: thus, taxonomically it would be incorrect to deal with it as a last category, as if it were “less a wrong” than the two first categories.
Within each category, every national system examined will be introduced separately: first the English, then the German, and finally the Italian.
It is difficult to find cases which are indisputable examples of restitutionary damages for proprietary wrongs in English law. It appears that there is always a possibility, no matter how small or remote, of explaining existing cases as having awarded some kind of compensatory damages. Certainly, those who oppose restitution for wrongs have sought to justify their criticism in this way. As will be shown, interpretation of such awards as compensatory are indeed possible, but they are the result of a lectio difficilior of the law. Explanations why awards for restitutionary damages should in fact be seen as compensatory damages tend to end up in complicated theories which, by their authors, are nevertheless seen as more acceptable than the more direct explanation which classifies the remedy granted as a case of restitution for wrongs. Legal comparison gives support to the restitutionary solution: where the defendant has received a benefit as a consequence of a wrong which he has committed, restitutionary damages seem to be the most appropriate instrument to achieve justice. As will be demonstrated, even German law, which is categorically opposed against the introduction of non-compensatory damages into the law of delicts, accepts that there are some “exceptions” where the compensatory model cannot apply.
Although it is difficult to find in English law a concrete and uncontroversial instance of restitution for wrongs, there is at least one case which can provide the necessary support for the concept of restitutionary damages. This is the well-known case of United Australia v. Barclays Bank19. A cheque payable to the claimant was converted by a third party, which handed it in to its bank. The claimant first brought an action in contract against the third party, then discontinued this action and claimed against the defendant bank in tort for conversion. The bank argued in defence that the previously made contractual claim had barred the subsequent tortious claim in accordance with the so-called waiver of tort principle. This point was rejected by the House of Lords, which gave its own interpretation of the meaning of “waiver of tort”. Construing its position on Lamine v. Dorrell20, the Court drew a distinction between choosing one of two alternative remedies on the one hand, and choosing one of two inconsistent rights on the other21 . In the latter case, once one avenue is opted for, the opposite avenue is barred. On the other hand, in the case of alternative remedies it is only if a claimant has successfully recovered through one of the alternative claims brought that this claim can operate as a bar to the other alternative claim22 .
As regards the claimant’s election between alternative remedies, Lord Atkin seems to qualify the remedies as rights located in different areas of the law of obligations, viz. contract and tort23. Viscount Simon L.C., on the contrary, appears to see an election not only within the law of obligations, but also within the law of damages. This has implications for the topic under consideration. His Lordship said:
“The substance of the matter is that on certain facts [the claimant] is claiming redress in the form of compensation, i.e., damages as for a tort, or in the form of restitution of money to which he is entitled, but which the defendant has wrongfully received”24.
The passage quoted seems to refer to an institution within the law of damages which shows the same characteristics as those identified for restitution for wrongs: 1) the defendant wrongfully receives a benefit; 2) the claimant is entitled to claim the benefit for himself; 3) the claimant does not claim compensation but a different measure, i.e. restitution.
Hence, His Lordship apparently accepts the idea that at least one tort, i.e. conversion, can give rise to a different quantification of damages at the claimant’s election, compensation and restitution. Is it correct to conclude that the restitutionary measure of conversion is an example of restitution for wrongs?
According to a very recent contribution to the English law of unjust enrichment, th”e remedy for the commission of such a tort is restitutionary because the defendant must pay the value of the proceeds of sale to the plaintiff without any inquiry being undertaken as to what the market value of the goods was at the time of sale, which would be the measure of the plaintiff’s loss”25. “In other words”, the author concludes, “the remedy for conversion can be assessed by reference to the defendant’s gain rather than the plaintiff’s loss”26. This is in line with the aforementioned position of the House of Lords in the United Australia case. Yet the fact that there is a restitutionary element in this head of damages does not necessarily mean that conversion triggers restitutionary damages, because there are other types of damages which can also serve a restitutionary function, as is the case for exemplary damages27. With respect to restitution for wrongs, two important elements are implied by the quoted statement: first, the quantification of damages seems to be independent of the claimant’s loss, hence these damages are non-compensatory. Second, the author’s reasoning appears to justify a definition of such damages as purely restitutionary. However, as has just been pointed out, the two elements are not as related to each other as the author seems to assume: it cannot be inferred from the non-compensatory nature of the damages that they are restitutionary.
The aim of restitutionary damages is to strip the defendant of gains made by a civil wrong28. If the restitutionary measure in conversion necessarily obtains this outcome (as opposed to coincidentally, such as in exemplary damages), then the law of torts has, in the form of remedies for conversion, at least one example of restitution for wrongs.
If milkman D uses P’s instead of his own bottles to deliver milk although P has explicitly instructed him not to do so, P will be allowed a claim in conversion on the basis that there is a serious misuse which “involves an obvious defiance of the owner’s rights”29. Thus, P will obtain the full value of the converted chattels. What is the measure of D’s gain in this instance? D had his own bottles, so he did not save any money by using P’s. Furthermore, let us assume that no bottles were broken, so that D cannot be said to have saved the expenses he would have incurred had he used his own bottles and broken some of them. The damages awarded to P are therefore far in excess of what would have been granted through restitution for wrongs. On the other hand, one could assume that the measure of damages is indicated by the full market value of the converted goods as a result of the “forced purchase”30 imposed upon the converter. In this case, “restitution” would be an appropriate definition even though, strictly speaking, the damages awarded do not represent the gain made by a wrong. This somewhat resembles a contractual action founded upon a fiction. Hence, in this context restitution does not mean “stripping the defendant of a gain which is the consequence of a wrong”, but “restoring the situation which would have obtained had the ‘contract’ been duly performed”.
There is indeed the possibility that an action in conversion may lead to an award of damages which seems restitutionary. Yet damages for conversion in themselves are probably not restitutionary. The difficulty here seems to lie in the fact that the tort of conversion includes a function which in civil law systems is performed by many different non-tortious legal structures: vindicatio, condictio, and actio de in rem verso are but the most evident among them.
The nature of conversion and its impact upon a restitutionary system involves issues which go beyond the scope of this paper. In the present context, it is sufficient to emphasise that this tort ought to be investigated in the light of the law of damages, especially as regards non-compensatory damages. The role which restitution for wrongs plays within remedies for conversion is less evident and would require some more convincing analysis. As long as the nature of the restitutionary measure granted in conversion is not clarified sufficiently, it will be difficult to see the restitutionary remedy awarded in United Australia as a strong case in favour of restitution for wrongs.
Beyond conversion cases, there are other examples of judicial authority which are relevant within the context of restitution for proprietary wrongs. The Law Commission Report No. 247 describes a recent decision31 as “[o]ne of the clearest judicial acceptances of restitution as an appropriate remedy for a property tort”32.
In this case, Ministry of Defence v Ashman, the defendants lived in an apartment owned by the claimant which was rented only to families of employees of the Royal Air Force. When the husband moved out and left his family behind, the claimant tried to evict the rest of the family from the accommodation. As the wife and her children had nowhere else to live, they remained in the apartment until they obtained alternative accommodation. The claimant sought to recover mesne profits for the time after the contract elapsed until both defendants had vacated the apartment.
The court held that the defendants, in paying a rent which was far below what they would have paid for a similar apartment rented at normal prices, were enriched through the perpetration of the tort of trespass to land. It was pointed out33 in the judgment that a person who occupies premises without the consent of the owner can be sued on two different grounds. On the one hand, the claimant can claim for the loss which arises from the tort, i.e. what in this judgment is referred to as “the normal measure of damages in the law of tort”. On the other hand, the claimant can compel the defendants to disgorge the benefit which they have received in perpetrating the wrong.
The Ministry claimed only for restitution, and the court granted the claim in full without raising the point that the claimant was not seeking compensation according to the “general rule”, or that no evidence of any loss was given. In fact, the claimant had not alleged any particular loss, nor was the claimant required to do so by the court.
The present analysis of proprietary wrongs was introduced with a caveat referring to the fact that lawyers sometimes prefer a lectio difficilior rather than accepting the simpler interpretation, according to which the remedy granted does not seek to compensate the claimant for a loss, but to redress an unjust situation by compelling the defendant to give up his benefit. That is to say in concreto: restitutionary damages. The Ashman case is relevant, not only because the court for the first time used the term “restitutionary damages” as a technical expression, but also because it gives an example of the fact that the “compensatory interpretation” of restitution for wrongs is a die-hard, as further analysis of the case reveals.
One opinion expressed in the case is very illuminating to help us to understand the theoretical difficulties faced by the judiciary in assessing restitutionary damages. The basic reservation of Lloyd L.J. can be summarised thus: this is not a case in which restitutionary damages are allowed, this is plainly a case in which normal damages for trespass are given34. The terms “plainly” and “normal” are not to be found in the decision, but they can be read between the lines. It is most difficult to follow this kind of reasoning. The instruments which the law of damages places at the disposal of the courts are not open-ended. If, in the case in question, the court is not granting restitutionary damages, then it must be granting compensation, as no other types of damages were available in this case, most certainly not any exemplary damages. Yet it seems rather odd to grant compensation on the basis of a benefit gained by the defendant, instead of a loss suffered by the claimant. How can this be justified in terms of a legal base? We do not find any answer to this question in the judgment.
Facing the same dilemma, an earlier decision tried to outflank the obstacle by resorting to a fiction. In Wrotham Park Estate Co Ltd v Parkside Homes Ltd35 , the defendant had built houses in breach of a covenant. The claimant could no longer enforce the covenant, because the houses had already been built and, in the opinion of the court, it would have been a waste of valuable resources if the court had ordered their demolition. The starting point was given by Lord Blackburn’s dictum in Livingstone v The Rawyards Coal Company36, which was adapted thus: “the general rule would be to measure damages by reference to that sum which would place the claimants in the same position as if the covenant had not been broken”37. As demolition was refused, only damages could be awarded. The problem lay in the determination of the quantum. The judge decided to stick to the g”eneral rule” of the Livingstone case and reasoned thus: if the claimants had granted a relaxation of the covenant, their damage would have been “such a sum of money as might reasonably have been demanded by the claimants from [the defendant] as a quid pro quo for relaxing the covenant”38.
In Wrotham Park, the judge was not reverting to an approach which was radically different from the one adopted by Lloyd L.J. in the Ashman case, even though the compensatory award was justified in a more articulate manner. The judge granted what was in fact restitutionary damages, but tried to hide this award behind reasoning in terms of compensation. Yet such reasoning is too artificial. The judge himself pointed out that the claimants would never have given their consent to the relaxation of the covenant. Furthermore, this construction is also unnecessary because it would have been possible to explain the measure of damages as the result of granting a restitutionary right. Instead, a highly complicated explanation is sought, which is generally known as the doctrine of “compensation for the lost opportunity to bargain”.
As it touches directly upon restitution for wrongs, it seems necessary to devote some time to this doctrine. It has been said39 that in such cases the claimant suffers a tangible loss, which can be quantified in the form of the lost opportunity to bargain with the defendant. Thus, the measure of compensatory damages consists of the amount of money which the claimant would have obtained from the defendant had the former bargained with the latter. Some remarks are appropriate on this theoretical construction.
The quantification of damages as the amount of money necessary to convince the party to accept the bargain is not consistent with the definition of the head of damage. If there is no evidence that the claimant would really have bargained with the defendant, a lost opportunity is nothing but a chance which the claimant had at the time when the wrong was committed to derive a future profit from his right. Therefore, this is an example of the loss of a chance to be awarded a specific benefit in the future. The characteristic feature of such damages is given by the fact that the future benefit is only possible, not certain, and can be quantified only through percentages. Accordingly and opportunely, the courts40, in cases of lost chances, will award only a percentage of the damage which the claimant would have suffered had the chance become reality. Thus, only a part of the theoretical benefit can be made good through compensation. For this reason, this doctrine restricts its application to the lost opportunity to bargain “with the defendant”: in this way, in the intention of this doctrine, damages can be quantified not as a percentage of the whole, merely possible loss, but as if the claimant had truly bargained with the defendant. Undoubtedly, the defendant wanted to obtain something from the claimant. But it is another question whether he was willing to pay for it. Therefore, his consent to payment is presumed just as the consent of the claimant to dispose of his right is presumed. Through this series of fictions the loss suffered does not appear to be a percentage of a merely possible loss. This is the paradox which is hidden within this theory, which concerns the loss of a chance, yet the chance is treated fictionally as if it were not a chance, but a real bargain not even implicitly formulated but agreed upon.
This doctrine resorts to a highly complicated explanation whereas a justification in terms of restitution for wrongs could do the same job more easily. Despite this, the doctrine of the lost opportunity to bargain enjoys great support by the judiciary.
In a slightly different context, Steyn L.J. (as he then was), commenting upon the measure of damages in the Wrotham case, reached a conclusion similar to the one put forward in this paper. He observed that the “argument that the Wrotham Park case can be justified on the basis of a loss of bargaining opportunity is a fiction”41. In itself, this is of course right. Yet this does not necessarily mean that the doctrine of lost opportunity to bargain must be rejected on the sole ground that it is based upon a fiction. Rather, it should be rejected because it produces a paradox and it is not necessary, because it is much easier to explain in terms of restitution for wrongs on which legal basis such damages are granted.
Unfortunately, as was previously hinted at, the judiciary is hardly willing to accept doctrines which contrast with the principle of compensation. As a result, damages are available in this type of situation only for as long as is possible for the claimant to claim an injunction, on the ground that damages for lost opportunity to bargain are limited to cases in which the possibility of an injunction exists42. This last doctrine is superfluous and supports a useless distinction between common law, in which no such damages can be awarded43, and equity, in which those damages are supposed to be a consequence of s. 2 of the Chancery Amendment Act 1858, known as “Lord Cairns’s Act”. The fact that this doctrine is nevertheless upheld by the courts speaks in favour of restitutionary damages rather than against them. Indeed, it must be only a matter of time before the courts realise that it is just an extreme attempt to avoid facing the fact that compensation in tort law is no longer the “general rule” but rather one rule among others. Legal comparison can help to bring about this transition.
Some judicial authority is aware of the situation. Cautious comments demonstrate that there is interest in restitutionary damages. But the judicial approach has been extremely circumspect. A good example of it is given by another famous case, Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd44, in which the claimant rented electrical gadgets to the defendant, who kept them even after the contract had expired. As the claimant could not prove to have suffered any loss, the court quantified the damages in the sum which the defendant would have had to pay had he hired the equipment for a longer period. The judges were clearly uncomfortable with such quantification. They noted more than once that “it is curious that there is no authority on the point”45. Nevertheless, the majority tried to formulate the measure of damages in accordance with the “general rule” of the law of damages, i.e. compensation. Thus, it was pointed out that only the loss of the claimant should be relevant for the quantification of the damage46. This being the explanation given, the majority left unanswered the question regarding how compensatory damages can make good a loss which does not exist47. The point was tackled by the third judge, who admitted that the claim “resembles, therefore, an action for restitution rather than an action of tort”48. The significance of this statement was immediately reduced by the observation that “it is unnecessary to place it into any formal category”49. No reason is given for this. In fact, it is vitally important to find the proper category. But the judge was well aware of the difficulties that any explicit mention of such category would have engendered. There was no loss to the claimant, therefore no compensation could be awarded. From the fact that damages have been quantified despite the absence of a loss it must be inferred that the court granted non-compensatory, in this case restitutionary, damages.
If one excludes intellectual property wrongs, there are no German cases in which the defendant has been compelled to give up a benefit originating from what the English literature calls “proprietary wrongs”. Normally, the courts deal with such situations not through the law delicts, but by applying the law of unjustified enrichment. An example will best explain the interaction between these two areas of law.
P rents different models of cars. D hires a model 1 car from P for a period of one week for a holiday tour to Scotland. As he finds the surroundings most enjoyable, D extends his tour by one day and returns the vehicle after eight days. P requires the payment of the extra day, but D refuses. D’s argument is that P has suffered no loss because he had several other model 1 cars which he did not rent on the day for which D extended his holiday.
As far as German law is concerned, the claimant has suffered no loss at all. Furthermore, as will be demonstrated later, the judiciary will not allow for restitutionary relief based on compensation principles within the law of delict. However, the code offers a non-delictual alternative to compel the defendant to give up his profit. In this context, the first sentence of § 812 (1) BGB states:
“A person who through an act performed by another, or in any other manner, acquires something at the expense of the latter without any legal ground, is bound to return it to him”50.
The reference to “an act performed by another” concerns the so-called Leistungskondiktion, or performance-based claim, which does not apply to the case in point. Much more interesting for an analysis in terms of restitution for wrongs is the mention of a claim not based upon performance, that is, a claim “in any other manner”, which German scholars call Nichtleistungskondiktion , i.e. non-performance based claim.
Beyond the requirement of the absence of a performance, the second element of the analysis is given by the term “etwas”, that is the “something” whose acquisition according to para. 812 (1) BGB triggers restitution. This s”omething” does not refer only to a pecuniary benefit which has been received by the defendant, such as money, or goods, or services51. The defendant is also enriched if he has saved money, or, more generally, if his wealth has benefited from obtaining “something”, in the sense that the defendant has saved expenses which he would otherwise have incurred, as shown by the following instance, known as the “ air travel case”(Flugreisefall)52 ,
A minor succeeded in boarding a plane from Hamburg to New York without paying for the ticket. The fraud was discovered on arrival because the defendant did not have the visa necessary to enter the USA. Thus, the claimant airline had to carry him back to Hamburg. In an action for unjustified enrichment, the claimant claimed back from the defendant the cost of the air ticket. The reason why no delictual action was brought is explained – with approval – by the court itself: the claimant could not prove that it had suffered any relevant loss from the conduct of the defendant, as the aeroplane was not full. Hence, no compensation could have been claimed because no concrete damage was suffered. In the absence of any restitutionary structure in delict, the claimant in the Flugreisefall could only sue in unjustified enrichment, through a performance based claim, to recover the value of the outbound flight, whereas restitution for the value of the return flight was granted under negotiorum gestio, paras. 667-687 BGB.
The judges affirmed that, even though an action in unjustified enrichment can be granted only when there is an increment in the defendant’s wealth, this increment does not have to be a positive enrichment, it being sufficient that the enriched has saved some necessary expenses.
Returning to the case of the car hired for eight days, but paid for a period of just one week, can P claim his due in unjustified enrichment through a Nichtleistungskondiktion? There are no legal obstacles to the success of such an action. D undoubtedly has been enriched by not having paid to hire the car a further day. This enrichment is at the expense of the claimant, but not transferred by the claimant, who has not performed anything which would explain the enrichment of the defendant. Hence, P can recover from D the money which corresponds to the cost of hiring the car eight instead of seven days on the basis of § 812 (1) 2nd alternative BGB.
Fearing an excessive expansion of the radius of application of the Nichtleistungskondiktion , judicial authority has put many obstacles before the “non-performance” impoverished who wants to claim in unjustified enrichment the gains made by third parties at his expense. Thus, even in those cases which theoretically would justify the action, the claimant is barred on other grounds such as the non-codified principle of the subsidiarity of the Nichtleistungskondiktion, i.e. that such an action will only lie if the enrichment was not acquired on the basis of a performance53. As a result, the function of the Nichtleistungskondiktion has been utterly reduced in practice54. Nevertheless, such a claim does exist and thus must have an important bearing on the issue of restitution for wrongs. Some thoughts, therefore, must be dedicated to the relationship between the Nichtleistungskondiktion and restitution for wrongs.
What follows from the above-presented Flugreisefall is that there are indeed some areas in which the two institutions largely overlap. In effect, a situation as in the Flugreisefall justifies a response both in terms of restitution for unjustified enrichment and restitutionary damages. The two avenues are different, but they both lead to restitution of the expenses saved for not having paid the ticket. More generally, the present analysis shows that where a non-performance based Kondiktion is granted, in many cases restitutionary damages could reach the same result. Thus, if German law introduced or applied restitution for wrongs, and if one just looks at the results which this would achieve, the law of delict would be able to cover many cases of non-performance based claims in unjustified enrichment. In other words, the wrongdoer could be forced normally to give up a benefit to the same amount in delict and in unjustified enrichment.
The second point is that, on closer examination, the ambit of application of restitution for wrongs reveals itself to be different from the one of the Nichtleistungskondiktion. This point can be illustrated by an example.
D is working as an estate agent for the housing society P. P would like to enlarge its business and requests D to purchase land on which P can build new houses. D is secretly in contact with the third party T and suggests that the latter purchases some land which D knows is up for sale. Once T has become the owner of the land, D will buy it at a much higher price on behalf of P. In return, D will receive from T a large bribe calculated in proportion to the money paid by P to T. When the plot is discovered, P claims the money paid to T and then obtained by D as a bribe.
That such a situation can give rise to a right of the victim to recover the bribe has been held in a well-known judgement by the Privy Council55. The question is whether the same situation gives rise to a claim in unjustified enrichment under German law. The right answer is probably that it should not. From the outset, there never was any valid obligation to pay the bribe. In other words, if D had not received the bribe, P would not have been entitled to it in his stead, with the effect that D never interrupted or diverted a transfer of wealth destined for the claimant. D’s enrichment is, therefore, not at the claimant’s expense. P has no possibility of securing the money obtained as bribe through the avenue of the Nichtleistungskondiktion . What is more, even if a non-performance based claim in unjustified enrichment could be applied, in practice it would be barred by the concurrence of a performance-based claim which the housing society P could bring against the party to which the impoverished has paid the money. Ergo, the scope of restitution for wrongs is different from the scope of the Nichtleistungskondiktion .
The third point underlines that the judicial mistrust for the Nichtleistungskondiktion is most unlikely to favour restitution for wrongs. The suspicion with which the Nichtleistungskondiktion is met is likely to be extended to any attempt to grant restitution through a delictual avenue: if the Nichtleistungskondiktionen are rarely conceded, there is no reason to believe that the courts would be better disposed to accept a different institution which exposes the system to the same risks of widening the area of the subjects protected. Thus, policy factors seem to play an important role in German law: where there is the danger of an excessive amount of claims, the judiciary tends to be very restrictive.
Wrongful interference with goods is dealt with as a normal case of unjust enrichment in Italian law. Hence, the cause of action for restitution has its roots in Art. 2041 c.c., which contains the general claim in unjust enrichment according to which
“A person who has enriched himself without cause at the expense of another shall, to the extent of the enrichment, indemnify the other for his correlative financial loss”57.
From this point of view, the system does not classify the interference as w”rongful”, but as “unjust”. This does not mean that this conduct itself becomes legal: on the contrary, it remains wrongful and gives rise to delictual liability on the part of the wrongdoer. The point is that the law of delict helps the victim only to the extent of compensating him for his loss, so that he has to claim in unjust enrichment if he wants to seize the benefit which the wrongdoer has derived from the perpetration of the wrong.
Looking at the requirements for this action, it is striking to note that direct performance by the claimant to the defendant is not amongst them. In fact, the provision in question does not depict a performance-based claim, as such a claim which arises from an undue performance is already provided by Art. 2033 c.c. The adjective “general”, which qualifies the claim in unjust enrichment, does not actually mean “available under any circumstance”. Indeed, the subsequent Art. 2042 c.c. explains that the action can be brought only subsidiarily, i.e. under the condition that no other claim is available to the claimant58. Therefore, “general” means “last resort available”: if all else fails, and the court thinks it unjust to leave the claimant without redress, it can weigh the interests of the parties on an equitable basis and grant an action ex Art. 2041 c.c. This allows the claimant to be indemnified up to a sum which lies between his own impoverishment and the enrichment of the defendant.
Let us revert to the example which has been used above to test the relationship between the German Nichtleistungskondiktion and restitution for wrongs: the defendant hires a car from the claimant for a period of seven days but does not return it until the eighth day. D’s argument in refusing to pay for the extra day is that the claimant has suffered no loss from his conduct. Analysing German law, it was shown that the legal system uses a condictio -like structure to compel the payment of the eighth day’s rent to the claimant. The reasoning followed by German law can be summarised thus: “there is no legal cause which sustains the transfer of wealth to the defendant. What is more, the wealth transferred ought to belong to the claimant”. On this basis, action is granted.
The Codice civile builds the general enrichment claim upon a different principle, although in the end both legal orders produce similar results. The Italian legislator conveys to the claimant the following message: “you must try to find your satisfaction through another claim and ought not to count on Art. 2041 c.c. Yet, if you really do not have anything else at your disposal, then I shall concede you a sort of equitable response, because otherwise leaving the situation as it is would produce greater injustice”. It does not matter whether the cause which should support the transfer is valid or not. What is important is that without such response there would be an unjust enrichment of one party at the expense of the other.
Using again our example of the rented car, it is possible to draw some more general conclusions concerning restitutionary damages. Let us assume that the basic rule on compensation expressed by Art. 1223 c.c.59 does not have any exceptions or alternatives60. In this case, P could not use a delictual avenue because he would not be able to prove any loss apart from trivial expenses. Neither can he claim for restitution of an undue payment, as none of the parties has received any payment at all. This leads to the conclusion that, without the claim of Art. 2041 c.c., D would go scot-free. This cannot be a fair result; the general enrichment claim must intervene. The requirements of the cause of action are all respected: D is enriched to the amount of one day of free car travel; P has not received his due for the hiring of the car, he is therefore impoverished for that amount of money; furthermore, there is a causal link between the two events, for the car used by D belongs to P, who has an interest in renting it for money. Finally, it is definitely contrary to justice that D can avoid the payment of the extra day for which he had the car at his disposal merely on the basis of a technical argument. Thus, it is extremely probable that an Italian court would grant a claim in unjust enrichment to the claimant.
Although the Nichtleistungskondiktion and the general enrichment claim are two institutions which have their roots in different legal principles, some of the thoughts which have been previously expressed on the former are also valid for the latter. Once again, cases such as Mahesan v. Malaysia Government Officer61 demonstrate that restitutionary damages have a wider scope of application than a corresponding non-delictual claim such as the one set forth in Art. 2041 c.c. Indeed, in the Mahesan case, no claim would have lied under unjust enrichment in Italian law. The general enrichment claim can hardly be used to obtain the bribe receive by the defendant, for the simple reason that, although the defendant has been enriched, the claimant has not been impoverished of the very money paid as a bribe. In other words, the sum paid to D by T was never meant to reach P. Thus P cannot be granted any claim in restitution because D has not been enriched at his expense, and this holds true even if the transfer of money turns out to have been part of a plot which was detrimental to P. It can nevertheless not be completely excluded that, in practice, the court will grant restitution on the basis of a reasoning purely based upon policy considerations. This is due to the particular function of the general enrichment claim, which has become an extremely flexible instrument to restore justice. In this respect, it is different from the Nichtleistungskondiktion, through which justice is not sought, but solely redress in the case of a misplacement of wealth, i.e. re-transfer of wealth to the impoverished.
Italian law does not seem to worry about the possibility of compelling the defendant to disgorge the profit which derives from the commission of a wrong. According to the Italian perspective, the fact that the basic rule of damages in contract and delict, Art. 1223 c.c., opts for a compensatory model does not mean that any other model should be automatically rejected. The introduction of such an instrument as the general enrichment action, which can theoretically give rise to a large amount of claims62, could suggest a positive disposition of the law towards restitutionary claims in general which are not viewed with real suspicion, but rather with cautious interest. Such caution can bee noticed within the judiciary against excessively broad claims in restitution, as the decisions on the general enrichment claim demonstrate.
This being the situation in the Italian law of unjust enrichment, the question is now whether there is any real necessity to develop a restitutionary remedy in the law of delict. The legal framework compels us to answer in the affirmative. Art. 2041 c.c. sets up the object of the action in unjust enrichment as the difference between the enrichment of the defendant and the impoverishment of the claimant. Even if the term “impoverishment” were stretched beyond the mere pecuniary loss, the wealth of both parties is considered in the assessment of the indemnity, whereas restitution for wrongs ignores the victim and concentrates exclusively upon the wrongdoer. More precisely, this difference is accentuated by the fact that under “impoverishment” judiciary and scholars will invariably understand nothing but a pecuniary loss of the victim without having any regard to the position of the wrongdoer63. Therefore, the introduction of restitutionary damages would close a loophole rather than furnishing a barely additional, and thus redundant, response.
As there seems to be enough room for restitution for wrongs within the Italian system, it has to be determined whether, in the present legal context, it is possible to introduce restitutionary damages to the system without changing the governing legislation. Some scholars think that it should be feasible, even though they develop their view with reference to non-compensatory damages in general, rather than specifically for restitution for wrongs. They base this theory upon Art. 1226 c.c., which says:
“If damages cannot be proved in their exact amount, they are equitably quantified by the judge”.
Art. 1226 c.c. is one of the three provisions which is expressly referred to by Art. 2056 c.c., which determines the measure of delictual damages. According to the traditional view64, the “equity” mentioned by Art. 1226 c.c. is nothing but the technical discretion of the courts. The judges, therefore, may exercise their discretion only once a loss has been proved, but cannot be proved to its precise amount. This doctrine interprets Art. 1226 as granting to the courts a limited discretion when it is particularly difficult to assess damages, without affecting the legal nature of this remedy, which remains the same as for every other head of damages. This theory has recently been challenged by a new interpretation of Art. 1226 c.c. which construes the provision as allowing the judges to circumvent the “general rule” of compensation and also grant non-compensatory damages65. Even though this doctrine does not mention restitutionary damages as such, it does refer to the possibility that the courts also take the enrichment of the wrongdoer into consideration, thus opening the way to damages based exclusively upon that enrichment. Therefore, even if there is no plain recognition of restitution for wrongs as yet, there is at least a delictual theory which furnishes arguments in support of such recognition. Indeed, there are signals from the judiciary66 which show that a link between delict and enrichment has already been established, albeit not with reference to proprietary wrongs.
Although it cannot be denied that Art. 1226 c.c. has a major role in assessing damages, the new doctrine which proposes to use it as an avenue to introduce non-compensatory, and thus also restitutionary, damages must be rejected because it ignores the function of this norm. As has already been pointed out by the traditional view, Art. 1226 c.c. contains nothing on the heads of damages which ought to be granted by the courts. On the contrary, it presupposes that a decision on damages has already been taken. In other words, the judges have first to choose one or more models of damages, for instance compensation or punishment, or both compensation and punishment. In a second step, they then have to decide how to assess damages in relation to the criteria chosen. Thus, Art. 1226 c.c. intervenes after the courts have decided which kind of damages they will allow. Moreover, Art. 1266 c.c. only comes into play if the victim cannot prove the exact amount of his loss. Should any difficulty arise, the judges will apply their technical discretion according to Art. 1226 c.c.
The boundaries between choosing the relevant head of damages on the one hand, and selecting the elements which are relevant for the assessment of quantum within the chosen head of damages on the other, such as enrichment of the wrongdoer and the degree of fault, can be very narrow, but, in principle, the difference is clear.
Within the general framework of delict and unjust enrichment, the question whether restitution for wrongs is a possible model in Italian law still remains open. On the one hand, the presence of a general enrichment claim eases the pressure on judiciary and legislator as many cases fall within the area of overlap between the two institutions. On the other hand, some academic writing has suggested to enlarge the law of damages so as to also include non-compensatory claims. Even though this attempt does not seem to rest on a solid basis, it nevertheless proves that Italian lawyers are moving in towards admitting restitutionary damages: once there are no fundamental difficulties in accepting a general enrichment claim, there is no reason why restitution for wrongs should be rejected as a matter of principle. This is all the more true if one considers that in Italy scholars exert considerable influence upon the judiciary. In other words, the category “proprietary wrongs” does not provide any instance of restitutionary damages. However, it shows a tendency in favour of non-compensatory remedies which could open the way to a restitutionary approach.
The remedies which are granted to the victim of an intellectual property wrong seek to compel the tortfeasor to give up the benefit which has been obtained through the perpetration of such a wrong whenever restitution can benefit the victim more than compensation. The simples way in which such a right can be classified is as an example of restitutionary damages, thus offering us a good example of restitution for wrongs. In fact, the difficulty which arises in this context does not concern the undisputed restitutionary nature of the claimant’s right but rather the question whether this right can be defined as giving rise to restitutionary damages.
In this context, the criticism against the notion of restitutionary damages is usually formulated within the following terms: the obligation which is imposed on the defendant is not referred to as “restitution for wrongs” but rather called “account of profits”67 (This terminological difference is apparently sufficient to reject the identity between restitutionary damages and an account of profits. Yet it is extremely interesting to note that even the most strenuous opponents of restitutionary damages do not seem to found their criticism upon the alleged non-existence of a restitutionary mechanism which performs the function which is linked to the damages in question. Rather, the difficulties concern only the label which has been chosen to represent this mechanism. Thus, it is not alleged that “restitutionary damages” and an “account of profits” aim at different results. It is only affirmed that “restitutionary damages” is not the right term to describe this remedy as damages ought only to be compensatory68. According to this position, the main difficulty therefore affects only the surface, not the content of the institution. Yet such a superficial difference cannot justify a useless multiplication of categories. If the account of profits is not an example of restitutionary damages, then what is it? Taxonomically, the definition of the account of profits as a remedial right on its own does not seem to be very satisfactory.
As will be shown below, numerous statutory provisions will entitle the victim of the violation of intellectual property rights to an account of profits.The account of profits is usually mentioned as a remedy resulting from an infringement, and always as a right which is granted in addition to damages. To a civil lawyer, the difference between the respective functions of damages and the account of profits is obscure. Once the distinction between common law and equity is overcome, there appears to exist no legal justification for sticking to different labels with regard to the same product. In this context, the main practical purpose seems to consist of a merely semantic definition of the rights of the parties: the loss of the claimant gives rise to damages, the benefit of the defendant allows an account of profits. The fact that not both of these remedies are understood to relate to damages can probably be explained only from an historical point of view. At any rate, judicial authority shows a clear understanding of the function of the account of profits which goes beyond the mere differences in label. Indeed, it has been said that:
“[t]he purpose of ordering an account of profits in favour of a successful claimant in a passing off case is not to inflict punishment on the defendant. It is to prevent an unjust enrichment of the defendant by compelling him to surrender those profits&”69.
This is a plain description of restitutionary damages. If there is any difference between such an account of profits and restitution of wrongs, it is difficult to reveal. Eventually, the fact that the two terms describe the same right has been asserted by the authority of the Law Commission, which recommends an abandonment of the label “account of profits” in favour of the omnicomprehensive term “restitutionary damages”70. The general term seems to be more precise than a more specific definition as it reduces confusion.
Despite this powerful opinion, damages and accounts of profits are still mentioned separately in the statutes as if they were conceptually different categories. Hence, s. 61 (1) of the Patent Act 1977 lists, among the claims which can be raised within proceedings for patent infringements, both damages in respect of the infringement, and an account of the profits derived by the wrongdoers from the infringement.
Again, s. 96 (2) of the Copyright, Designs and Patents Act 1988 allows relief in an action for infringement of copyright, amongst others, by way of damages and of an account of profits. Moreover, in cases of infringement of design rights, damages and accounts of profits are also available. In this short list of statutory examples, s. 14 (2) Trade Marks Act 1994 may be mentioned, which allows the claimant to claim for damages and which provides that “accounts or otherwise [are] available to him as [are] available in respect of the infringement of any other property right”.
Sometimes, there are differences in the availability of both responses, but such differences are not relevant as regards the nature of those heads of damages. S. 97 of the CDPA 1988, for instance, disallows damages when the defendant has acted in good faith. Yet those differences hardly justify a separation between damages and accounts of profits. Other legal reasons for such a separation, as has already been said, cannot be found.
Both judicial authority71 and the statutes72 tend to deny a cumulation of compensatory and restitutionary damages. The reason for posing such an alternative between the two remedies is not easy to follow, especially if one thinks that the award of exemplary damages does not theoretically exclude compensation. However, speculations about this so-called double recovery – which actually does not seem to be a double recovery in any real sense, as the head of damages would probably be different – would go beyond the scope of this analysis.
An interesting question concerns the subject-matter of restitutionary damages, which, in the context of intellectual property wrongs, are called an account of profits. It seems to be undisputed that the defendant can be compelled to give up all of the benefits realised from the wrong which turn out to be a positive increment of his assets73. Do restitutionary damages also include the expenses saved through the commission of a wrong? An affirmative answer would undoubtedly strengthen the role of restitution for wrongs. The little authority which exists on this point are no more than obiter dicta. The general position is stated by Millett J. in the Potton case: “in principle I do not see why not”74. Indeed, there is no evident reason to bar an approach which seeks to allow recovery of the “unrealised profits” as well. It has long been generally accepted that restitutionary rights ought not to be restricted to positive increments of the assets. This would be contrary to justice and common sense. Moreover, it would exclude from the scope of the action many situations which potentially engender enrichment in consequence of a wrong. Surely, saved expenses can be the subject-matter of a claim in restitution for unjust/unjustified enrichment in English, German and Italian law.
If restitution of the expenses saved by the defendant lay outside the ambit of enrichment, there would be many cases in which the victim of the wrong would be left without a remedy, and the same could be said for any claimant who has been impoverished by a non-tortious enrichment of the defendant. This cannot be just. Furthermore, even if restitution for unjust/unjustified enrichment and restitution for wrongs belong to two different categories and are characterised by different causes of action, from a comparative analysis of the two institutions emerges a concept of enrichment which presents the same features: the enrichment must affect valuable assets; and it can be either positive or negative75.
A company produces mechanical music players in which a rolling tape plays different songs. One of those songs happens to become a success, and its author, until that moment not very well known to the audience, achieves great popularity. The problem is that the company has never asked the composer the authorisation which would have been necessary for the reproduction of his music. The author claims in delict for the infringement of his patent rights.
With this case76, which dates back more than one hundred years and goes under the name of Ariston case, the then supreme court, i.e. the Reichsgericht (RG), established for the first time the judicial position on remedies to intellectual property wrongs which is still considered to be good law.
According to the court, the violation of the such rights opens three different and alternative avenues to the victim. First, the claimant can seek compensation for the loss which he has suffered from the wrong. Second, if no loss has arisen, or if the claimant thinks that it would be more convenient, he can claim for the amount of money which the defendant would reasonably have paid to acquire the rights to publication. Third, he can compel the defendant to give up all of the benefits which originate in the usage of a patented good without authorisation. In other words, he can claim an account of profits.
The Ariston case is extremely interesting not only because it is the first decision on the point, but also because it was evident that the claimant had not suffered any loss from the wrongdoing. On the contrary, the propagation of his music through the mechanical players gave him a fame which he probably would not have achieved otherwise77. The wrongdoing had only positively affected the wealth of the claimant. The Differenzhypothese , according to which the damage consists of the difference between the real situation in which the claimant stands and the situation in which he would have stood had the damaging events never taken place, was of no help to the claimant78: the wrong had not caused any damage which could have been compensated.
Since the Ariston case the situation has hardly changed. A claimant who sues in delict can still choose among three different possibilities how to proceed against the wrongdoer in intellectual property cases79.
Most of this area of law has been developed by judicial decisions. Accordingly, the three-fold choice was granted to the claimant in the case of infringement of patents80, designs81 or trademarks82. For copyright violations, § 97 (1) Urheberrechtsgesetz (UrhG, Copyright Act) provides that the claimant can claim for an account of profits instead of compensatory damages. A similar provision is now contained in § 14a Geschmacksmustergesetz (GeschmMG, Designs Act) for designs. § 139 (2) Patentgesetz (PatG, Patent Act) continues to provide “compensation” for wilful or negligent violations of copyright, but states explicitly that in cases of slight negligence on the side of the perpetrator, courts will allow for compensation which “emains within the limits between the loss suffered by the injured party and the benefit which has accrued to the perpetrator”.
Interestingly, although the judiciary has historically shaped almost this entire field of law, there is little or no mention in judicial decisions of the nature of the claim which is granted. If there is no dispute on the compensatory avenue, which does not differ at all from every other example of compensation, the judges barely devote any attention to the legal analysis of the other options open to the claimant. The judiciary seems convinced that both the fictional agreement and the account of profit are nothing but two normal methods of measuring damages83. The main explanation which follows such statements is that the peculiarity of the methods of quantification is a consequence of the peculiarity of intellectual property rights themselves, which are rights which can easily be violated and thus require particular instruments for the integration tuning of compensatory rules84.
Such statements are an important source of information, but the same can be said about the judicial silence on the nature of the rights arising from the infringement of intellectual property rights.
The first and most important piece of information which originates in the doctrine in question is that the account of profits is a delictual remedy. This is a very precious piece of information. The terminology of the German legal dogmatic school is very precise. A German court, for instance, would never put forward the argument that what matters is not the denomination, but only the substance of a legal institution: i.e., with reference to the topic under consideration, the fact that the claimant can claim for an account of profits as a remedy for a wrong. Therefore, if the account of profits is held to be a delictual response, the fact that no compensation is granted must signify that the courts are allowing a non-compensatory right to the claimant. This means that the “general rule” on compensation of § 249 BGB cannot apply. Of course, one could define such cases as mere exceptions85, but in the face of such cases the “general rule” seems to be a little less general. What is more, the scope of these so-called exceptions is rather wide.
The second piece of information can be inferred from the vagueness which characterises the judicial analysis of the nature of the account of profits. As a matter of fact, both the account of profits and the fictional agreement do not fit into any of the recognised categories of the law of damages. A very general description in terms of “customary law”, functional to the integration of the usual remedies, as the courts seem to prefer, does not help to explain the nature of such damages. The lack of any apparent interest on the part of the judiciary for a coherent legal explanation shows that the courts are extremely uneasy with such an institution, as if they did not want to admit that, in reality, they are granting restitutionary, or, more generally, non-compensatory, damages in the face of a long tradition which sees compensation as the aim of damages.
The literature is well aware of the judicial uncertainties and keeps a more coherent line: in general, there is a strong refusal to accept a definition of the account of profits as an instrument of the law of delict. Instead of trying to find a legal justification for the responses other than compensation within the law of delict, scholars normally deny that the account of profits and the fictional agreement86 belong to the law of damages87. They propose an alternative interpretation, which thus far has not been followed by the judiciary, which construes the account of profits as an example of Nichtleistungskondiktion, i.e. the enrichment claim triggered by a transfer of wealth not based upon a performance.
A second line of scholarly attack is pursued by observing that the claims triggered by the infringements of intellectual property rights are der Sache nach, i.e. as a matter of fact, nothing but examples of unjustified negotiorum gestio. Such position is based upon a purported similarity with the cause of action in § 687 (2) BGB, which states:
“If a person treats the matter of another as his own, although knowing that he is not entitled to do so, the principal may enforce the claims based on §§ 677, 678, 681, 682. If he does enforce them, he is liable to the manager as provided for in § 684 sent. 1”88.
§§ 677, 678, 681, and 682 BGB describe the position of the manager in the negotiorum gestio.
Of course, saying that § 687 (2) BGB depicts “as a matter of fact” the same claim as for the violation of intellectual property rights does not help us in the least to understand the nature of the latter claim. This is just a masked attempt to divert the model of liability from delict to unjustified enrichment. But the judiciary does not fall into this trap and sticks to the delictual construction. Nonetheless, the judicial position does not preclude the right to claim in unjustified enrichment whenever the requirements set forth in §§ 812ss BGB are met: this avenue is always open to the impoverished party. The main point here is that unjust enrichment is no more than an alternative to the claim in delict, which remains still available to the claimant.
The debate between the judiciary and scholars is still going on. Despite the different perspectives, both positions show that the lawyers do not feel comfortable when dealing with delictual rights arising from infringements of intellectual property rights. “Exceptions”, “non-delictual claims” are but some of the expressions used in this context89. This uncertainty is mainly due to the fact that both judiciary and scholars alike accept as the starting point the doctrine according to which the “general rule” in delict law is compensation. More than that: compensation is seen as “the” function of the law of delict90. Under such premises, it is of course very difficult for restitution for wrongs to emerge and reach an autonomous position near compensation. Yet the recognition of restitutionary damages would facilitate legal analysis: as intellectual property wrongs demonstrate, such damages already exist in practice. Now it is necessary to produce a further effort and give them theoretical dignity as well.
The analysis of intellectual property wrongs provides a good example for the difficulties presented by restitution for wrongs in those legal systems which are characterised by a strongly theoretical approach founded upon a strict preference for a compensatory response in the law of delict. Interestingly, restitutionary damages are able to find their own way even in such legal systems, which prove to be flexible enough to integrate them into the pre-existing structure. It appears that no change of statutory rules will be required in this context. Rather, it is the theoretical approach which needs to take due account of the existence of restitutionary damages.
In this context of intellectual property rights, a legal comparison produces unexpected results: the “Italian laboratory” shows a surprising lack of innovation. As far as intellectual property wrongs are concerned, the legal system remains anchored mainly to a traditional, compensatory model: the perpetration of a wrong in this sector of law gives rise to a delictual response which will be almost exclusively in terms of compensation. No statutory regime intervenes to allow restitution of the benefit gained through the wrong; neither does judicial authority step in to fill the statutory gap by recognising the right of the victim to claim the enrichment of the wrongdoer ex delicto .
The judiciary refuses even to admit that, for instance, the breach of design rights is to be seen as triggering a loss in re ipsa, which would discharge the victim of the burden of proving the concrete existence of any damage91. Apparently, therefore, in the case of the violation of an intellectual property right the wrongdoer can go scot-free, at least as regards the gain made by the wrong.
Certainly, a legal system which is so favourable to the wrongdoer is hard to image. Indeed, the apparent friendliness of the law towards such defendants finds another explanation: other instruments intervene to curb the benefit accruing to the defendant, so that the victim is not fully deprived of protection. Whether such protection can be as effective as restitution for wrongs is a question which will be addressed below.
The applicability of the general enrichment claim of Art. 2041 c.c. to cases of unfair competition and violation of intellectual property rights is not disputed92. Such a claim opens the possibility of establishing a parallel with the German Nichtleistungskondiktion. In this context, the German judiciary preferred an exceptional recourse to delict which offered the victim an alternative between compensation and restitution. Scholars were generally strongly opposed to this judicial doctrine, preferring the adoption of the Nichtleistungskondiktion instead; in Italy, while the judiciary seems to adopt a model akin to the English pattern of restitution for wrongs, the literature tends towards the Italian judicial solution of a stricter law of damages, i.e. more in line with the “general rule”, accompanied by a restitutionary claim in unjust/unjustified enrichment93.
The disadvantage of the above solution relates to the limited scope of application of the action ex Art. 2041 c.c.: the victim may only claim restitution up to the amount of his own loss, so that the wrongdoer can retain the part of the benefit which exceeds the loss of the claimant.
A more effective remedy, which is often used by the courts, grants a response in terms of moral, i.e. non-pecuniary damages. In this case, the content of moral damages is stretched to cover the enrichment derived from the wrong. In concreto, moral damages will cover the part of the loss which cannot be made good through pecuniary damages up to the point at which the courts think that they have reached fair compensation according to the rules of technical discretion laid down by Art. 1226 c.c. for the assessment of damages. The courts do not deny that moral damages have a compensatory function. Nevertheless, they admit that the quantification of damages must consider also the “injurious intensity” of the wrong, for which the enrichment of the wrongdoer is expressly held out to be a good example94.
The main difficulty with this kind of approach is created by Art. 2059 c.c., according to which non-pecuniary damages may be awarded only in the cases provided for by the law. Those are mainly criminal causes of action. Hence, where the wrongdoer has not committed any criminal offence, the victim cannot be awarded moral damages. Moreover, using moral damages with a restitutionary function is deceptive, because it could justify the impression that the courts are only allowing compensation, whereas in reality they are granting restitution.
Recently, the Cassation Court has explored new territory, probably because this Court was aware of these difficulties. A seminal case95 on the violation of copyright shows a judicial tendency to widen the scope of application of, and thus the role played by, Art. 1226 c.c. In effect, a power or duty has been conferred upon the courts to evaluate the consequences for both parties which have been triggered by the wrong, thus giving the judges the possibility of including in their assessment of damages the benefit which the wrongdoer has derived from the wrong. This new judicial doctrine has been applied by some lower courts96, but still represents the exception rather than the rule.
Clearly, an attempt has been made to enlarge the limits of the “general rule” of compensation. Nonetheless, it cannot be said that this spurious compensatory model has developed into a pure restitutionary claim. Different elements support this statement. First of all, judicial reasoning is still mainly based upon the compensatory principle. Even in the case of violation of intellectual property rights, where other legal systems accept a deviation from the “general rule”, the Italian judiciary sticks to compensation. It is up to the victim to seize the benefit obtained by the wrongdoer through the election of another restitutionary avenue, for instance by using the general enrichment claim of Art. 2041 c.c.
A further relevant consideration concerns the role played by restitutionary thinking within the assessment of damages. The enrichment of the wrongdoer is not, in itself, a sufficient factor for granting a delictual claim. The judiciary always requires the existence of a loss suffered by the victim in the sense of a diminution of his wealth. Once this loss is proved, it will be open to the courts to evaluate damages in a way which also takes into account the benefit obtained by the defendant. However, this benefit is not an autonomous head of damages.
On the other hand, the rejection of a restitutionary model does not mean that the system is still relying upon a pure compensatory model. The mixture of compensatory, punitive and restitutionary elements in the claim in delict which is triggered by the violation of intellectual wrongs suggests that the response which is normally granted could be classified as exemplary damages. In fact, the victim often obtains more than his pure pecuniary loss, so that the above-mentioned Differenzhypothese seldom applies. If the claim is neither for pure compensation, nor for restitution, and if the amount which is granted excludes nominal damages as a possible explanation, then punishment must be the aim of the remedy. This purpose fits into the preventive function which the law of delict must exercise within the very delicate field of intellectual property rights which, as the German judiciary has pointed out, are extremely easy to violate, where the potential benefits of such violations are huge, and the potential risk very low97. It is therefore important to convey the idea that the violation of such rights can trigger harsh consequences for the wrongdoer.
The Law Commission observed only a few years ago that “there is no tradition of awarding restitution for breach of contract”98. Very recently, this statement has found support in Lord Steyn’s speech in a landmark decision. In the Blake99 case, His Lordship said that “there is virtually no support for a general action for disgorgement of profits made by a contract breaker by reason of his breach”. And yet, as the House of Lord remarked in the decision in point, this does not mean that restitution for wrongs could not be an exceptional remedy, applicable at the Court’s discretion, whenever “a just response to a breach of contract so requires”.100
In Blake, the defendant was an ex-employee of a UK Intelligence Service. At the time when he took his job, he signed a declaration which included an undertaking not to divulge any information concerning his service. This notwithstanding, he published a book without any governmental permission, in which he described his life as a spy. The fact that he was a self-confessed traitor who lived in a foreign country after an adventurous escape from a British prison helped him to obtaining substantial royalties from his publication.
In the trial before the Court of Appeal, Lord Woolf MR, after having pointed out that the “general rule” is that damages for breach of contract are compensatory, observed that:
“[i]f the court is unable to award restitutionary damages for breach of contract, then the law of contract is seriously defective. It means that in many situations the plaintiff is deprived of any effective remedy for breach of contract”101.
The decision of the Court of Appeal was handed down a very short time after the publication of the Law Commission Report102 and reflects strongly the content of the Report itself, which favoured a common law development of this area of restitution for wrongs rather than statutory intervention103.
It seems that the Report’s Recommendation has had a profound impact on the judiciary. In fact, the House of Lords restated it in Blake saying that restitution for wrongs would be appropriate only in exceptional circumstances, where other remedies were inadequate, so that no “fixed rules can be prescribed”104.
The analysis of judicial decisions on restitution for breach of contract shows that the definition of breach of contract as a wrong has been quite controversial. There is quite recent authority which rejects an award of restitutionary damages for breach of contract on the grounds that such damages can be granted only in tort, namely Surrey CC v Bredero Homes Ltd.105 This decision is interesting from the viewpoint of taxonomy for it offers an instance of the difficulties encountered by legal scholars and judiciary in their effort to give clear legal shape to restitutionary damages. The argument “restitution for wrongs is possible only in tort” is not solid. A more convincing explanation is necessary to elucidate why, when a wrong is committed, only tort or only contract give rise to restitution. Otherwise, there is the risk of mixing up different categories such “wrongs”, to”rts” and “contract” so that the expression “restitutionary damages for breach of contract” is referred only to contract, as if “breach of contract” were not a wrong. This view must be rejected because it cannot explain why torts and equitable wrongs are breaches of duty, whereas breach of contract is not.
The facts of Bredero are as follows. The claimant sold a parcel of land to the defendant. The transaction was subject to a covenant by the defendant, whereby the land was to be developed in accordance with the planning permission issued by the claimant. Despite this, the defendant built on the land a number of houses which was in excess of the planning permission. The claimant claimed restitution of the gains which accrued to the defendant from the breach of the covenant. The claim was rejected by the Court of Appeal. According to the Court,
“the starting point & is that the remedy at common law for breach of contract is an award of damages, and damages at common law are intended to compensate the victim for his loss, not to transfer to the victim if he has suffered no loss the benefit which the wrongdoer has gained by his breach of contract”106.
In the case in point, the court did not see any good reason to depart from this rule. It was not denied that there are cases in which the claimant can recover in respect of the defendant’s gain. Yet those cases are all concentrated in the law of torts and “[t]he liability in the present case is solely in contract and not in tort”107. A justification given for the exclusion of restitutionary damages is that damages for breach of contract are assessed according to the compensatory rule in Hadley v. Baxendale108 so that there is no room for non-compensatory remedies. One can infer from this that no such excluding compensatory rule exists with reference to the law of tort. However, no explanation is provided to clarify how restitutionary damages are compatible with the compensatory rule which, according to a dictum by Lord Blackburn in Livingstone v The Rawyards Coal Company109, determines the measure “where an injury is to be compensated by damages”. Hence, apparently, what is seen as an obstacle within breach of contract is not perceived the same in tort.
In Bredero, the court did not deny that a remedy for breach of contract could protect the aggrieved party’s restitutionary interest. However, the cases in which such an interest might be taken into consideration are, according to the court, limited to the use made by the defendant of the claimant’s property, where the term “property” is interpreted in a wide sense110. What is more, restitution for breach of contract would collide with the need for certainty which characterises particularly sensible areas such as commercial law111 . This set of arguments recurs time and again in the legal analysis of the topic at issue. The Commission Report112 isolated it as one of the major obstacles against a restitutionary structure for breach of contract, and the judiciary113 seems well aware of this. In fact, Lord Hobhouse warns in his dissenting speech in Blake that “if some more extensive principle of awarding non-compensatory damages for breach of contract is to be introduced into commercial law the consequences will be very far reaching and disruptive”114.
Thus, in Bredero a thesis was put forward which ran in exactly the opposite direction as the one formulated in the Blake case. It was said in Bredero that there are no restitutionary contractual damages, and only restitution for torts is possible. As the case in point concerned contractual damages, no restitutionary award could have been granted. Thereby, the Court in Bredero explicitly admitted that restitutionary damages do exist in English law. This reason which was given to reject those damages in cases of breach of contract seems suggest that legal clarity is only or mainly needed in commercial relationships. The weakness of this argument has properly been stressed in the passage from the Blake case before the Court of Appeal quoted above. Even from a taxonomic point of view, it is difficult to recognise that breach of contract is a wrong115 and yet to deny restitutionary damages which are accepted for all the other categories of wrongs. Such exclusion requires further elucidation than the one put forward in the judgments examined. And indeed the House of Lords has recognised the fragility in the reasoning in Bredero by stating clearly that the approach in the Wrotham Park case ought to be preferred116.
Regardless of this dispute, the definition which was given of wrong (namely, breach of duty) at the outset of this study does include breach of contract, which could thus potentially give rise to restitution for wrongs. It should be remembered that a violation of contractual rules, if wrongfully perpetrated, necessarily involves the breach of a duty owed to the other party.
One scholar has pointed out that “restitutionary damages for breach of contract remains the remedy that dare not speak its name”117. This assertion, which was made before the Blake case, is still correct in accentuating the fact that, apart from Blake case, Wrotham Park118 and Jaggard v. Sawyer119 are the only two cases in which, disputably, restitution for non-fiduciary breach of contract has been awarded120. In other important cases, in which the measure of damages was triggered by a breach of contract and appeared to be restitutionary, the courts121 tend to apply the rules on violation of property, especially by recurring to the so-called way-leave cases122 , as if the breach of contract was only the occasion to activate the remedy, and as if the ground for granting damages was tortious interference with property rights. And even for Wrotham Park and Jaggard v. Sawyer it is far from obvious whether breach of contract gave rise to restitution for wrongs, because in both cases the courts qualified the damages which were granted as compensatory.
In Jaggard v. Sawyer123, the defendant was the owner of a plot forming part of a small development. He built an additional house outside the development and, in breach of a mutual covenant which bound all original owners of the plots and their successors against and in favour of each other, connected this house through a driveway to the main road of the development. The claimant, who was the owner of another plot, sought an injunction to prevent access to the main road. The claim was rejected by the court below, which awarded damages instead, and the decision was upheld by the Court of Appeal. In granting damages, the court applied the “lost opportunity to bargain” approach of Wrotham Park which, in the opinion of the court, dealt with an award of compensatory, and not restitutionary damages. With reference to Wrotham Park, this position was justified with the following argument:
“[t]he defendants had committed a breach of covenant, the effect of which continued. The judge … had … to assess the damages necessary to compensate the plaintiffs for this continuing invasion of their rights”124.
The problems of accepting the “lost opportunity to bargain” theory have already been exposed above125 . There is a further difficulty which goes beyond the theoretical issues connected with this position. A rejection of restitutionary damages in the Wrotham Park type of situation leads to problems in those cases where the breach of contract has been cynically pursued by the wrongdoer, and where yet the court cannot quantify any damagesin favour of the victim. Not all breaches of contract can be construed as giving rise to a continuous violation. A construction in terms of compensation would allow the wrongdoer to go scot-free as only nominal damages could be awarded126.
The analysis of restitution for wrongful breach of contract in a civil law system involves three aspects, which correspond to the division of the law of obligations into contracts, unjustified enrichment, and torts. A first step involves an examination of the law of delict, and it will be shown that satisfactory results cannot be achieved within this area of obligations. The focus thus moves to the law of contract. The second step will therefore investigate whether German law provides a gain-based, contractual remedy for breach of contract. In the third and final step, it will be examined whether German law knows, under other language, a mechanism which could achieve restitution for breach of contract, in particular under the principles of the law of unjustified enrichment.
As has already been mentioned, the unanimous view held by the judiciary127 and scholars128 in Germany is that breach of contract cannot be qualified as a delict, because breach of contract concerns breach of a duty which is owed towards a specific person or group of persons.
There are also other circumstances which make it difficult to understand breach of contract as a delict. German delict law is based principally upon three “small” general clauses. The first, and most important, is contained in § 823 (1) BGB, which states:
“A person who, wilfully or negligently, unlawfully injures the life, body, health, freedom, property or other right of another is bound to compensate him for any damage arising herefrom”129 .
There is no mention of breach of contract in this list of protected rights. The only way in which breach of contract could be included is by a wide interpretation of the “other rights” which are mentioned in the provision. However, in the view of German lawyers, this would overstretch the meaning of the term “any other rights”. Furthermore, § 823 (1) BGB expressly mentions compensation of the damage arising from the wrong as the remedy which arises from such a violation. Therefore, the norm could be understood as not dealing with restitutionary damages at all, but only with compensation, so that the judiciary would be left to allow restitutionary damages on another basis130.
The second delictual cause of action is found in § 823 (2) BGB, which establishes a duty to compensate the loss arising from the infringement of statutes which are intended for the protection of others. Finally, the most general clause is to be found in § 826 BGB, which allows compensation for wrongs which were perpetrated wilfully and contra bonos mores , i.e. contrary to public policy. Apart from the fact that these last two provisions are seldom applied, both of them contain an explicit reference to the compensatory function which is linked to their causes of action so that, using the same line of reasoning as for § 823 (1) BGB, nothing can be inferred from these provisions which is in favour or against restitutionary damages. Thus, the general delictual rules are of no help in establishing any proper support for granting restitutionary damages for breach of contract.
However, the strongest criticism which can be opposed to a delictual avenue lies in § 249 BGB, which states:
“A person who is obliged to make compensation shall restore the situation which would have existed if the circumstances rendering him liable to make compensation had not occurred”131 .
§ 249 BGB is the basic provision for the law of damages. The main obstacles to any restitution for wrongs result from this provision, not from the norms which constitute the law of delict. § 249 BGB is understood to give rise to two legal principles which complement each other. The first one is called “principle of compensation”, Ausgleichsprinzip, and affirms that the focus of the law is on the situation of the victim, not of the wrongdoer132. The former should obtain full compensation for every loss which results from the damaging event.
The principle of compensation finds its boundaries in the so-called Bereicherungsverbot , or prohibition of enrichment (at the defendant’s expense). According to this second principle, the victim should not be placed in a position which is better than the one which existed before the damage occurred. It should be noted that the Bereicherungsverbot is not really an autonomous principle, but rather a mere logical consequence of the Ausgleichsprinzip133. Nevertheless, the courts give strong emphasis to this principle, which they even understand as an element of ordre public within the law of damages134.
The existence and the predominance of such a rule on compensation presents a serious impasse to any delictual construction of restitution for wrongs. In fact, this probably provides the main explanation for the fact that, with some important exceptions such as in intellectual property law, restitutionary damages have been generally ignored by German law.
With a delictual avenue ruled out, the question arises whether the law of contract can offer more support for a theory of restitution for wrongs. An analysis of German judicial decisions produces only one instance135 in which the response granted by the court can perhaps be likened to restitutionary damages for breach of contract.
A baker was in a contractual relation with the owner of a shop which, among other products, sold bread. The shop owner provided every day a specified quantity of dough which the baker was to turn into a certain quantity of bread. After some years, the shop owner discovered that the baker had been using part of the dough for himself. The shop owner claimed for damages for breach of contract. The baker admitted that he had diverted part of the dough, but denied that his conduct had caused any loss to the claimant, because, despite the subtraction of the dough, he had baked always the same quantity of loafs. Although each of those loafs was smaller than it should have been, all loafs were nevertheless sold by the claimant for the same price as if they had been of normal size. The court did not accept this line of defence and awarded to the claimant a sum of money which corresponded to the value of the dough used by the defendant. The court observed that a loss had undoubtedly occurred to the claimant every time that the defendant committed this wrong. For the quantum of damages to be awarded, it did not matter whether the claimant could successively mitigate or even avoid the loss.
It is not entirely clear from this judgment whether the court awarded damages for breach of contract or restitution for unjustified enrichment (in this case on the base of a condictio furtiva (sic). However, given that damages were awarded, such damages could have been explained in compensatory terms if one accepts the viewpoint of the court that the damage must be assessed at the moment at which the wrong is perpetrated. Nevertheless, the reasoning by the court is weak. In particular, the statement that subsequent events do not affect the liability which arises from the wrong is arguable. Thus, if an interaction between the damaging event and subsequent events is not rebutted, it might be possible to draw the conclusion that the court ultimately awarded restitutionary damages. Be that as it may, the court decided the matter on a contractual, not on a delictual basis. Eventually, a “contractlicher Schadensersatzanspruch”, i.e. a contractual claim for compensatory damages, was granted.
This judgment could be understood as a faint signal in support of restitutionary damages. Yet there are some difficulties with such an interpretation. The decision preceded the introduction of the German Civil Code, BGB, by almost a decade. Therefore, the norms which presently govern contract law were yet to come into operation. The modern German contract law on breach of contract is extremely complicated, and its analysis would be irrelevant to the topic under consideration. It is only important to point out that, when the law of damages is called upon, contractual provisions always refer to “Schadensersatz , i.”e. compensation: see e.g. §§ 325 and 326 BGB, with the consequence that § 249 BGB applies. This seems enough to support the conclusion that contract law has no room for restitutionary damages as such.
However, there is another institution of contract law which, although avoiding the language of damages, is very relevant to restitution for wrongs. For cases in which a performance which is owed by one party becomes impossible, § 281 (1) BGB provides as follows:
“If the debtor obtains a substitute or a claim to compensation for the subject-matter of the obligation as a consequence of the circumstances which impede performance, the creditor can require restitution of what has been received as a substitute or the transfer of the compensatory claim”.
This is called “stellvertretendes Commodum”, or “substitute benefit”, and can be claimed in any case of subsequent impossibility of the performance, independently of any fault-based liability of the debtor. The German word for “substitute” is “Ersatz”. Is it possible to infer that this term comprises also the gains accruing to the debtor from a breach of contract? Since “breach of contract” is not a civil law expression, it is difficult to answer this question. Certainly, some cases of breach of contract can give rise to restitution of the benefit. In this context, the so-called commodum ex negotiatione acquires particular relevance, as the following case136 will show.
The claimant and the defendant bought two neighbouring plots of land. The defendant covenanted that he would register a right of passage through his plot in favour of the claimant, but failed to implement this covenant. After some time, the defendant sold his plot to a third party, wilfully stating that it was free from rights of other parties. When the claimant wanted to build some garages on his plot and communicated his intention to the new owner, the latter refused to acknowledge the claimant’s right. On the basis of § 281 (1) BGB, the claimant sought restitution of the benefit which the defendant obtained by omitting to register the claimant’s right to passage.
The claim was accepted by the courts below, but rejected by the Federal Court (BGH) for a reason which is very interesting from the perspective of restitution for wrongs. The court held that in order for § 281 (1) BGB to operate, the subject of the obligation must be identical to the subject of the substitution137. In the present case, the subject of the performance which had become impossible was not the same as the one for which Ersatz was obtained. The defendant had not covenanted that he would sell his plot to the claimant, only that he would register a right to passage in favour of the claimant. On the other hand, the money which the defendant had received was paid for the transfer of ownership in the plot. According to the court, § 281 (1) BGB would have applied if the defendant had promised in a valid contract to convey the property in the land to the claimant, but had instead sold and conveyanced the land to a third party. In that situation, the claimant could, by offering to pay his agreed price to the defendant, claim restitution of the benefit which accrued to the defendant in the form of the purchase price paid by the third party.
What the court thus describes is commonly referred to as commodum ex negotiatione , i.e. the gain obtained by a defendant who sells and passes to a third party the title in an object which he had previously contractually promised to the claimant. There is general agreement138 in the judiciary and in the literature that the claimant is entitled to such a gain.
The commodum ex negotiatione plainly describes a case of restitution for wrongs. Yet the German case which has just been quoted demonstrates that § 281 BGB does not cover every possible situation of restitution for breach of contract. Indeed, the BGH rejected the restitutionary remedy which was sought by the claimant in a context in which restitutionary damages would have been a very powerful response to have at the court’s disposal. This notwithstanding, § 281 BGB provides a very good basis for the theory of restitution for wrongs.
The German law of unjustified enrichment follows a pattern akin to contract law: in terms of unjustified enrichment, a breach of contract will in principle lead to no more than restitution of any performances exchanged between the parties139 . The German civil code distinguishes two avenues. Restitution can be either the consequence of a breach of contract stricto sensu , or it can be related to some particular problems inherent to the contract which makes it void or voidable.
As regards pure breach of contract, § 325 BGB offers an alternative to the party not in breach. He can either claim compensation for breach of contract or can “retreat”, zurücktreten, from the contract, in which case restitution of what had been transferred in performance of the contract will take the place of compensation. Should the party not in breach opt for restitution, the restitutionary procedure is regulated by §§ 346-356 BGB. Primarily, the parties have to return what has been performed, § 346 BGB. This basic rule is subject to modifications, or even exclusion, depending on the thing still existing – totally or partially – in the recipient’s assets and on his negligence.
Negligent or wilful damage or destruction of the thing will normally bar restitution. Furthermore, if this damage occurs after the party not in breach has exercised his right of retreat, § 347 BGB states that a compensatory right arises in favour of the party to whom the thing should have been given back. § 347 BGB, interpreted together with § 100 BGB, modifies the basic rule: the duty to restitution is stretched to encompass any benefit which the party has derived from the use of the thing which has to be given back from the moment of performance onwards. Hence, if one party breaches a contract of sale of a car, and the car has already been hired by the buyer after completion of the obligatory contract, the benefit obtained will have to be returned to the other party together with the car.
Unlike the case of negligent or wilful behaviour, § 350 BGB states that the right of retreat survives the accidental destruction of the thing. Thus, the party not in breach will be able to retreat from the contract despite the fact that he cannot perform his restitutionary duty to the other party.
From the statutory framework emerges the following picture. Under certain circumstances, the negligent or wilful party will have to compensate the loss of the other party. Beside compensation, § 347 BGB allows restitution of some of the benefits accrued from the usage of the thing to the party who has to return it. Yet, German law does not link the duty to restitution of the benefit to the perpetration of the wrong, but to the exercise of the right to retreat from the contract140, the parties to which should be placed in the same position in which they were before the contract141 . This rule, however, does not seem to apply to the benefit which still survives in the assets of the recipient if the thing itself has been destroyed accidentally before restitution could be performed. Thus, the code apparently has opted for an “everything or nothing at all” (alles oder nicht) approach which is based upon negligent of wilful conduct.
In the case of void and voidable contracts, the liability regime is more lenient. On the one hand, the enrichment to be returned will be increased by any benefits which have accrued to the recipient from the use of what he received from the other party, §§ 818 (1) and 100 BGB. On the other hand, the enrichment action against the defendant of good faith will be limited to the amount of the enrichment which survives in the assets of the enriched party, § 818 (3) BGB. This second rule corresponds to the English defence of change of position. It is still unclear whether or to which degree the enriched party will have to return a benefit which he obtained by selling or using the object of his initial enrichment. This is plainly a case of restitution for wrongs. The extensive debate among scholars has not resulted in any definitive response from the judiciary. In the literature142 the view prevails that the gains due to the particular skill of the enriched are not to be given up.
However, once the enriched party has acted in bad faith, he will clearly have to give up such benefits. In this case, the rules on pure breach of contract come into play143. This is due to § 818 (4) BGB, which refers to the “general provisions” in case the enriched party of bad faith. While there is some dispute as to what precisely includes these general provisions, there is a widespread consensus144 that para. 281 BGB counts amongst those.
This relationship between unjustified enrichment and a restitutionary mechanism for bad faith is illustrated by the following example145.
The claimant sold a lorry to the defendant, who knew that the contract of sale was void. Despite this, the defendant transferred the lorry to a third party at a profit. When the claimant found out that the transaction was invalid, he claimed restitution of the lorry. The defendant asserted that restitution in kind was impossible, and instead offered the monetary value of the lorry under § 818 (2) BGB. This would have allowed the defendant to keep a profit, i.e. the difference between the value of the lorry and the price obtained from the sale to the third party.
The BGH rejected the defendant’s allegation. In the opinion of the court, § 818 (1) BGB determines only the starting point for evaluating the measure of restitution. When, as a consequence of the defendant’s bad faith, the so-called stricter liability, verschärfte Haftung , applies, the measure of damages is increased. There is no reason to privilege a defendant who is acting in bad faith in comparison to the claimant. Therefore, the defendant was ordered to give up the gain made through his sale to the third party. According to the court, it is interessengerecht, i.e. it corresponds to a just evaluation of the interests of the parties, that § 281 BGB applies an enriched party which acts in bad faith. This last statement shows that the judiciary, in line with the German tradition of the Interessenjurisprudenz, is aware of the relevant policy considerations in allocating a benefit.
What is therefore the scope of application of § 281 BGB? According to the BGH146, this provision applies to the entire law of obligations. If this is correct, then the provision should not be limited to contract and unjustified enrichment, but should also apply to cases of delictual liability. What is more, such a wide application would provide an even stronger argument in favour of restitution for wrongs even though, it must be remembered, the norm covers only some situations. Yet the prevailing view147 rejects the application of § 281 BGB to delictual events. This point is subject to discussion. Scholars148 put forward the instance of the banker who sells the debentures of the claimant. Here, as for this opinion, the claimant has a restitutionary claim based upon § 281 BGB independently of any further duty to compensation in contract or delict. However, this view is generally rejected in favour of the application of § 251 (1) BGB, which provides that
“Insofar as restoration is not possible or is not sufficient for indemnifying the obligee, the person obliged to make compensation must indemnify the obligee in money”149.
This norm clearly points to the opposite direction to § 281 BGB in that it excludes restitution of the Ersatz as understood by § 281 BGB and limits the subject-matter of the claim to the good to be performed or its value in money. Hence, from the point of view of restitution for wrongs, the present situation in German law seems to be that contract and unjustified enrichment grant more protection to the victim of a wrong than the law of delicts.
The following discussion of the Italian law on restitution for breach of contract is based on the same division into the three pillars of the law of obligations which has been used above for German law. Although both legal systems stem from the same root, the results are extremely different. It can be anticipated that, in general, Italian law, coherently with the line of strict refusal which has already characterised the response to proprietary wrongs, does not admit any recovery of the gains made by the wrongdoer.
The Italian system of delictual liability is built upon the general clause of Art. 2043 c.c., which states:
“Any fraudulent, malicious, or negligent act that causes an unjust loss to another obliges the person who has committed the act to compensate the damages”.
Could such a general clause also cover breach of contract? Theoretically, the letter of the law does not exclude it. More problematic appears to be an attempt to fit breach of contract within a definition of wrong as it is accepted in the Italian system, i.e. in terms of the violation of a victim’s right, or of a norm which aims to protect the victim150. Whereas it is logical for English academic writing to place “breach of contract” within “breach of duty”, the link between “breach of contract” and “violation of an interest” lacks such immediacy.
Even if it is conceded as a theoretical possibility that Art. 2043 c.c. leaves the door open to restitution for wrongs, there is another obstacle to surmount. The measure of delictual damages is determined in Art. 2056 c.c. This norm refers to some provisions on the quantification of contractual damages. Among the provisions referred to, the most relevant is Art. 1223 c.c., which states:
“The measure of damages arising from non-performance or delay shall include the loss sustained by the creditor and the lost profits insofar as they are a direct and immediate consequence of the non-performance or delay”151.
The second part of this provision relates to causation and can thus be ignored in the present context. The first part mentions only non-performance and delay as triggering events, but, because of the reference by Art. 2056 c.c., it must be read as including delicts as well. So which framework emerges from Art. 1223 c.c.?
It is plain that the basic rule on damages describes a compensatory model. Art. 2056 c.c. expressly mentions compensation as its own aim. The heading of Art. 1223 c.c. reads “compensation of the loss”. Therefore, when awarding damages, the courts must aim primarily at making good a loss suffered by the claimant. The delictual damage is hence primarily seen as a negative economic effect upon the victim’s assets152.
Rebus sic stantibus, scholars and the judiciary do not seem interested in the development of a gain-based remedy in delict.
Art. 1218 c.c. defines contractual liability by stating:
“The debtor who does not exactly render due performance is liable for damages unless he proves that the non-performance or delay was due to impossibility of performance for a cause not imputable to him”153.
The provisions which help the courts in assessing damages are exactly the same in the case of both delictual and contractual liability, i.e. Art. 1223 ff. c.c. The only relevant difference lies in the fact that in contract, a defendant who has not acted maliciously is liable only for foreseeable damages, Art. 1225 c.c. As the same rules apply to delict and contract, it is difficult to justify a difference in the quantification of the respective damages: if restitutionary damages are to be allowed, they should be granted in both cases.
If one party breaches a contract, Art. 1453 c.c. grants to the other party two options: he can choose to demand either performance of the contract or its dissolution. In case he chooses the first, the law provides various norms to compel the defendant to perform: enforcement by delivery or release, Art. 2930 c.c.; enforcement of obligations to perform an act, Art. 2931 c.c.; enforcement of obligations to refrain from an act, Art. 2933 c.c. None of those provisions contemplate the possibility of obliging the defendant to give up the profits which he has derived from his breach of contract. If, on the other hand, the party which is not in breach chooses to dissolve the contract, then Art. 1223 c.c. intervenes with the consequences which have been described above. This does not necessarily imply, though, that contract law involves no institution which could cover the same function as restitutionary damages. In fact, if a party opts for dissolution of the contract, only the party which is not in breach can claim damages, but both parties can claim back their performances under the rules on unjustified enrichment. As will soon become apparent, a faint copy of the restitutionary mechanism we are looking for can be traced within the law of unjustified enrichment, so that, under given circumstances, the wrongdoer can be compelled to give up his gain.
The basic rule is that a party who makes a payment which was not due can claim back this payment, Art. 2033 c.c. On this basis, there is no room whatsoever for compelling the wrongdoer (in our case: the enriched party) to give up any part of his benefit which exceeds the performance by the claimant. Unlike in German law, the measure of restitution is not very flexible: generally, no extension can be made and, strictly speaking, no restriction based on the model of change of position, either, because this “defence”, which is available primarily for restitution of a specified object, bars the claim of 2033 ff. c.c. and thus triggers the general enrichment action, which has different features.
Yet, as was stated above, even this very strict model of restitution for unjustified enrichment allows, in some cases, the application of a mechanism which reaches results which correspond to those achieved through restitution for wrongs. Let us analyse the following example in the light of the law of unjustified enrichment.
P hands over to the scholar D an ancient and precious book for D to use gratuitously for a given period of time. P intends this to be a comodato , i.e. gratuitous loan for use. Yet D wilfully sells the book to a bona fide third party T for an extremely good price. As this transaction meets the requirements of Art. 1153 c.c. on transfer of ownership in chattels, title to this book passes to T. Thus, P cannot claim restitution of the book from T. Can P claim the benefit which accrued to D as a consequence of D’s skilful sale of the book? If the answer is in the affirmative, then the Italian law of unjustified enrichment must have an institution which bears similarities to restitution for wrongs. On the wilful alienation of an unduly received object, the first two sentences of Art. 2038 (2) c.c. provide the following:
“A person who transferred a thing he received in bad faith, or who transferred it after becoming aware of his duty to return it, is under an obligation to return the thing in kind or to pay its corresponding value. However, the one who made the payment not due can demand what has been given as payment for the transfer and can even take direct action to collect the payment”154 .
Hence, P can either claim restitution of the monetary value of the book, or can compel D to give up to him what D obtained from the sale to T. P will opt for the second avenue if it is more beneficial to him, as in this case in which D sold the book at a price which exceeded its value. Thus, P is likely to demand from D what D “has been given as payment for the transfer”. This payment comprises two elements: the value of the book, and the additional money paid by T as a result of D’s vending skill. The combination of these two elements shows that the application of Art. 2038 (2) c.c., covers the same function as restitution for wrongs. En passant, it might be observed that the same claim is available to the German impoverished in § 816 (1) BGB. From the point of view of this paper, however, this claim is less interesting than in Italian law because German law has the general provision of § 281 BGB.
The cause of action in Art. 2038 (2) c.c. furnishes support to the theory of restitution for breach of contract. Yet it is evident that this provision covers only a few cases in which a restitutionary mechanism for wrongs may be adopted. Cases such as Blake155, for instance, would find no restitutionary response to protect the victim of the wrong. Nonetheless, Art. 2038 (2) c.c. proves that there is a starting point for build up a theory of restitution for breach of contract.
“Other wrongs” does not indicate any category with features which can be identified positively. Rather, this is a residual category for all wrongs which do not fit into any of the other categories. This lack of homogeneity becomes particularly evident through legal comparison, as civil law systems ignore any difference between common law and equity, which still influences the English legal analysis. In fact, as far as English law is concerned, the category “others” deals especially, if not exclusively, with the so-called equitable wrongs. In principle, there is no reason why an award of restitutionary damages should be limited to proprietary torts. Similarly, and as has been stated above, no artificial distinction will be made between “torts” and eq”uitable wrongs”. All causes of action will be founded just upon “wrongs”.
There is little dobut that restitution for wrongs is not limited to proprietary wrongs. Although such damages are called “accounts of profits”, it is clear even to the courts that such a form of relief is not based upon any compensatory principle. With regard to breach of fiduciary duty, it was held in Regal (Hastings) Ltd v Gulliver that:
“if a person in a fiduciary relationship makes a secret profit out of the relationship, the court will not inquire whether the other person is damnified or has lost a profit which otherwise he would have got”156.
There is unanimous judicial authority that, in the case of breach of fiduciary duty, the wrongdoer can be compelled to give up the benefits which result from his perpetration of the wrong. Regal was confirmed by Boardman v Phipps, a case which involved the status of a constructive trustee who takes advantage from some information which he has obtained by virtue of his position157 . Once it was established that the defendant, who was solicitor to the trustees, was to be treated as fiduciary in relation to some trust matters, it was followed that confidential information which he obtained by acting for the trust was to be considered the “property” of the trust itself. It is arguable whether confidential information should indeed be properly qualified as equitable property. Even without referring to proprietary terminology, a restitutionary duty can be recognised on the stronger basis of a breach of a fiduciary relationship. At any rate, the misappropriation of such “property” was held to be a wrong leading to a duty to make good the loss, or to give up the benefit obtained. Restitution was sought and granted. The response took the form of an account of profits.
A decision which concerns breach of confidence contains a clear statement on the definition of profit as the result of an account:
“What has the claimant expended on manufacturing these goods? What is the price which he has received on their sale? and the difference is the profit”158.
In this case, the defendant manufactured his product using information which was given to him confidentially by the claimant. The latter, who had not authorised the production, sought an injunction to restrain the defendant from producing these particular goods, and claimed an account of profits. Both were granted by the court.
In the literature, breach of confidence is sometimes seen as an infringement of intellectual property. Thus, it is dealt with in that category, although it is acknowledged that the judicial approach is different from the general approach in cases of intellectual property159. Yet this position seems to miss the point that, although breach of confidence can, at times, originate in a violation of intellectual property rights, such a violation is not a necessary element for breach of confidence, as the following case will show.
In the so-called Spycatcher case160 , a former member of the British Security Service MI5 wrote a book on his activities as a spy in violation of both his employment contract and the provisions of the Official Secrets Act 1911. The book was published outside the United Kingdom. One of the defendants bought the British newspaper serialisation rights and published an extract of the book some days before the book’s publication in the United States. The claimant sought an account of the profits made through the publication of the excerpts in the United Kingdom. Restitution was granted on the basis of breach of confidence. It is not completely clear whether the wrong committed by the defendant was a consequence of any violation of intellectual property. The preferable explanation is that of a wrong which results from the infringement of an obligation of confidentiality upon the members of the MI5. This obligation has a contractual nature, for it arises from the employment contract, but it also has roots in the Official Secrets Act 1911.
Looking for the legal principle which could support the award of an account of profits, Lord Keith stated that this was to be found in “the principle that no one should be permitted to gain from his own wrongdoing”161. However, Lord Goff observed that this cannot be held to be the true principle as its scope is too wide “and does not itself provide any sure guidance to the solution of a problem in any particular case”162. According to this last view, this principle does not have general validity. Rather, it must be examined individually in every single case.
As far as the “other wrongs” are concerned, three main groups of cases can be identified for German law in which the term “restitutionary damages” could be used. The first group concerns what in English legal terminology is breach of fiduciary duty. The second group of judicial decisions deals with breach of confidence. Finally, in the third group cases relates to the violation of rights to personality.
The above chapter on proprietary wrongs dealt with the claimant who attempts to recover in unjustified enrichment a bribe which a third party had paid to the claimant’s employee.163 Such an action, if constructed as a wrong of which the claimant was the victim, was doomed to fail. This served to illustrate that restitution for wrongs and restitution for unjustified enrichment have different areas of application. This conclusion receives further support if one takes a look at those cases which, in English law, would fall under the label “breach of fiduciary duty”. The following case may help to illuminate this point.
The defendant D was an employee of the firm P, which dealt with the transport of industrial waste. D had accepted a bribe from the third party T in exchange for transporting metal for T. P, after discovering that this bribe had been paid, claimed restitution of the moneys paid to D164.
Some of the statutory basis for such a claim can be found in § 675 BGB. According to this provision,
“[t]he provisions of 663, 665 to 667 & apply mutatis mutandis to a contract for service or a contract for work which has for its object the charge of an affair”165.
The provisions mentioned refer to mandate. Among those, § 667 BGB is of particular relevance for the topic under consideration. This provision states:
“A mandatary is bound to hand over to his mandator all that & he obtains from the charge of the affair”166.
This last norm has been used by the judiciary as a tool to grant restitution of anything which has been obtained by the “fiduciary” without the “beneficiary’s” knowledge. The prevailing view in the judiciary167 and literature168 is that “all that the beneficiary obtains” is to be interpreted as including everything which has been received in connection with the mandate. This also includes money paid as a bribe.
In the above-mentioned case, the BGH followed this doctrine and, applying § 667 BGB, compelled the defendant to give up the benefit accruing to him from the wrong.
As it emerges from the description of the restitutionary duty upon the defendant, the court utilised a restitutionary mechanism which is based upon the commission of a wrong, and which is independent of any loss suffered by the claimant. In Germany, this mechanism is not considered to be connected to the law of damages. On the contrary, if a loss arises, the defendant may be exposed to a concurrent claim for damages169. The cause of action of § 677 BGB is autonomous. In other words, a claimant will be allowed recovery under § 677 BGB on its own, so that an award made under this provision is neither restitution for unjustified enrichment, nor damages triggered by a wrong. As regards the function of this claim, it plainly corresponds to an award of restitutionary damages. German terminology ought not to deceive on this point.
In causes of action involving breach of confidence, the courts see no reason to treat a wrongdoer differently from somebody who has violated intellectual property rights170 , so that secret information pertaining to a company is placed on the same level with patent, copyright, and similar intellectual property rights. This view resembles the position which English academic writing has taken on breach of confidence. Yet the German doctrine seems to be more precise, because the two situations are clearly kept separated even if they are held to be similar enough to justify the same kind of response.
In one famous case171, the two defendants, who were employed by a computer manufacturer, resigned from their positions in order to start a new company together with a third person. The defendants revealed to the new company secret information about a new model of computer, information which they had obtained when still working for their old employer. As a result of this information and their work for their old employer, the defendants were able to produce and distribute a new computing machine before their old company could do the same. That company sought delictual relief against its old employees, and against their new company.
What makes this case peculiar is that the claimant based its action upon the law of delict, instead of relying on the criminal law provision in § 17 Gesetz gegen den unlauteren Wettbewerb (UWG, Unfair Competition Act), which was barred by limitation. The court allowed the claim on the basis of § 826 BGB, which provides compensation for damage caused wilfully and contrary to public policy. As regards the measure of damages, the claimant was given the same choice between compensation, a fictional agreement, and an account of profits, which he would have been offered for violation of an intellectual property right.
Although scholars172 do not seem to be completely convinced that such an expansion of the method used for the quantification of damages arising from intellectual property violations is really desirable, judicial authority does not show any intention of abandoning this line. For this reason, what has been said above about infringements of intellectual property can be considered to apply to breach of confidence as well.
An extremely interesting evolution of the law of damages can be observed as regards the violation of personality rights. Three cases mark this evolution. They will be briefly commented upon.
The first decision is the so-called Paul Dahlke case173. Mr Dahlke was a German actor who accepted an offer to pose for a photographer. While the set of photographs was taken, the photographer proposed that the actor should pretend to ride a motor scooter, which the photographer happened to have at hand. What the photographer did not disclose to Mr Dahlke was that he had taken photos of other important personalities on the same motor scooter for the purpose of selling the said photos to the company which produced the motor scooters for an advertising campaign. The actor, who knew nothing of the campaign and thought that the photos would be published in a magazine, brought an action for damages against the photographer and the publisher of the advertisements. The court explained that the conduct of the defendants opened two different avenues to the claimant which, in this very case, would have produced the same result.
On the one hand, the court granted damages according to the model of the fictional agreement, which has been dealt with above in the context of intellectual property rights: damages were assessed on the basis of the amount of money which under normal circumstances (die üblichen Bedingungen ) would have been necessary to buy the publication rights from the claimant174.
On the other hand, the court stated that the claimant could have claimed in unjustified enrichment for restitution of an amount of money which would have corresponded to the sum for which he would have normally given his permission to publication. It is not specified in the decision whether this should be pursued in the form of a Nichtleistungskondiktion, but it can be inferred from the facts that no performance-based Kondiktion would have lain against the publisher.
In the Paul Dahlke case, the court had to decide how to proceed when the personality right of a well-known person was violated. A few years later, the same question was posed with reference to a victim who was not known to the general public. This is the famous Herrenreiter case175.
During an equestrian event, a photographer took a picture of one of the competing horsemen. The photo was then sold for advertising purposes without the authorisation of the horseman, who some time later saw an image of himself on horseback advertising a product which stimulated male virility. Understandably, the horseman sought delictual relief against the advertising company.
In the opinion of the court, the doctrine of the Paul Dahlke case could not be applied. A fictional agreement is only possible when the victim has suffered a tangible pecuniary loss, i.e., to put it into English terminology, if he has really lost the chance to bargain for his own image. But in the present case, the horseman was not a famous person, so that he could not prove to have suffered any kind of pecuniary loss deriving from the wrong because he had never had any bargaining power on this matter. Furthermore, the claimant had made it very clear that he never would have sold the right for his image to be used in this context. Nevertheless, the circumstances in which the image of the claimant was published justified compensation, namely for the pain and suffering caused by the use of the image of the victim for this particular kind of product. Thus, the court granted damages to the same amount at which the previous instance had quantified the fictional agreement between the claimant and the defendant. The legal basis for this form of compensation was found in § 847 (1) BGB, which states:
“In the case of injury to the body or health, or in the case of deprivation of liberty, the injured person may also demand fair compensation in money for damage which is not damage to property”176.
For the purposes of granting compensation in such cases, the meaning of d”eprivation of liberty” was stretched by the court to signify “deprivation of the possibility of taking decisions regarding one’s own life”. Thus, alongside the physical deprivation, the court also recognised an “intellectual” form of deprivation, which gave rise to compensatory damages177.
These two decisions have set the framework for the response triggered by the violation of rights to personality of “popular” as well as “unknown” victims178 . In a recent judgment, though, the judiciary has introduced a completely new language179.
The claimant was Caroline, Princess of Monaco. She sought rectification of some statements made in two magazines, which not only gave the false impression that the claimant had given an exclusive interview, but also quoted statements which the claimant had never made and which concerned the core of her private life. In addition to rectification, the claimant claimed delictual compensatory relief in the form of damages for non-pecuniary loss.
The court granted rectification and damages on the basis of the violation of the victim’s right to self-determination. Yet the most interesting part of the decision concerns the kind and nature of damages as assessed by the court. The line of reasoning followed by the judges can be summarised thus: damages for the violation of the right to personality do not have their legal base in § 847 (1) BGB, which governs the conditions for an award of damages for non-pecuniary losses. Rather, they have their roots directly in the protection of the person granted by Arts. 1 and 2 (1) GG (i.e. Grundgesetz, the German Constitution), which deal with human dignity and the free development of personality. Once this head of damages is freed from the restrictions of § 847 (1) BGB, which compelled the judges to the use of a more or less “compensatory” language, it is possible to grant damages based upon criteria which are different from mere compensation. In fact, the court individuates in the case of violation of rights to personality the satisfaction of the victim and the function of deterrence as the two main evaluative factors.
Before examining the consequences of this new position, it seems appropriate to reflect on this judicial development from the perspective of restitution for wrongs. The main instruments in the hands of the courts were, until the Caroline case, the fictional agreement and compensation for non-pecuniary loss. The fictional agreement method is of no use to victims such as “ordinary people”, who from the beginning did not have any bargaining power. The claimant can elect to claim restitution of the unjustified enrichment or delictual compensation, but in both cases the court will not resort to restitution for wrongs.
In some cases, compensation for the non-pecuniary loss could be equivalent to restitution for wrongs. Nonetheless, it would be wrong to speak of restitutionary damages in this context. Compensation for a non-pecuniary loss which has been suffered by the victim is granted bearing in mind the position of the victim, not the position of the wrongdoer. Certainly, there is the chance that the two positions coincide, but such a coincidence is purely accidental, not systematic: theoretically, in the first case it does not matter whether the defendant benefited from his wrongdoing, although in practice the judges will tend to take such benefits into account within the assessment of damages.
Does the Caroline von Monaco case change this framework? It does, but not from the perspective of restitution for wrongs. In the light of the criteria outlined by the court, it seems that this seminal decision is introducing exemplary damages into German law. In particular, the emphasis which the judgment places on the preventive function suggests a local variation of exemplary damages. This becomes all the more evident in the words of the court itself: the benefit deriving from the wrongdoing is, in the opinion of the judges, only one of the elements which the court has to consider in granting damages. But the court also states180 that this does not imply, in the cases of inconsiderate commercialisation of personality, that restitution would automatically be allowed for the entire gain. As in the case of compensation for non-pecuniary losses, restitution can coincide with the indemnity granted, but this coincidence is merely incidental, not necessary. As a result, despite the fact that it is extremely difficult to deny that judicial authority has introduced a non-compensatory element in the law of damages, it would be incorrect to conclude that this is a restitutionary solution.
The exemplary nature of damages awarded in the Caroline von Monaco case is largely disapproved in the literature181, which bases its concern on a judicial decision which precedes the Caroline case by a few years. There, the court expressly refused to recognise a decision by the Superior Court of the State of California granting exemplary damages to the claimant on the ground that exemplary damages were contrary to German ordre public182. The German court differentiated the punitive function of exemplary damages from the function providing satisfaction to the victim, which is recognised to be within the scope of damages ex § 847 BGB. Be that as it may, both the satisfaction and prevention functions of the damages awarded in the Caroline case on the one hand, and the way in which such damages are in concreto applied on the other, suggest that these are to be classified as exemplary damages, if one does not want to stretch beyond any acceptable standard the definition of Schmerzensgeld , i.e. pain and suffering, which is allowed in the above-mentioned cases by § 847 BGB. More interesting in the present context, however, is a scholarly analysis which sees a link between the Caroline case and restitutionary damages. This view deserves closer attention and will be shortly examined.
In the light of the German law of restitution, such a statement is comprehensible, but misleading. More than two decades ago, an influential paper183 proposed to use the German law of unjustified enrichment to compel wrongdoers to give up the benefit actually received in the case of violation of personality rights. Through the law of enrichment, therefore, it would have been possible to reach the same result as in delict. In fact, the proposed method was an attempt to enlarge the radius of the Nichtleistungskondiktion for policy reasons. The merit of this doctrine lies especially in that it covers many cases which could have justified an award of restitutionary damages without endangering the harmony of the law of delict, because the claim remains purely within the law of unjustified enrichment. Of course, such an approach would not have limited any scope for restitution for wrongs, because delict and unjustified enrichment are different areas of law, which also differ in their application (limitation, subject-matter, etc.). Nonetheless, some of the practical achievements of restitution for wrongs could have been obtained through this proposed theoretical construction.
Very recently, the same author184, commenting on the Caroline case, has returned to the topic of his older article. This time, however, he uses the term “restitutionary damages” for referring to the Caroline case in the context of restitution as an instrument to protect privacy. This gives rise to two kinds of difficulties.
On the one hand, the relationship which is here assumed between restitutionary damages and the law of unjustified enrichment is taxonomically incorrect: the latter does indeed deal with restitution, but not with damages, which pertain to contract and delict. Restitutionary damages are rather part of the law of damages and can occasionally, but not necessarily, overlap with restitution for unjustified enrichment, as has been shown in the discussion of the relationship between the Nichtleistungskondiktion and restitution for wrongs185 .
On the other hand, this doctrine ignores the function of restitutionary damages. In the Caroline case, the court affirmed very clearly that the benefit of the wrongdoer is only one among the elements which ought to be taken into consideration when awarding damages for the violation of personality rights. Hence, according to the court, restitution is plainly not the aim of the delictual rights arising from the wrong.
Whether the Caroline case will open a path for restitutionary damages is unclear. Hints of a crisis over the “general rule” of compensation can clearly be recognised in the decision in point, but to this date, the judiciary has not given any unambiguous signal in favour of restitution for wrongs.
Three groups of cases will be dealt with below. The first group pertains to the violation of personality rights. The second group, which is more relevant, concerns the so-called environmental loss, which the legislator has introduced in order to tackle environmental threats. This institution is extremely interesting and has raised an intensive debate in the literature. Finally, there is a very small number of cases which cannot find any specific grouping but which share a response which is non-compensatory and perhaps restitutionary.
Unlike for English and German law, breach of fiduciary duty will not receive any substantive treatment for Italian law. The reason for this is simple: it seems that Italian law does not grant to the victim of this wrong a right to restitution of the gain made by the wrongdoer. Although the Italian legislation on mandate is similar to the German statute on this point, the question of restitution for wrongs does not arise.
Yet this kind of restitutionary mechanism could be anchored within the statute. Art. 1713 (1) c.c. states:
“The mandatory & shall turn over to [the mandator] all that he has received as a result of the mandate”186.
This formula could theoretically create a restitutionary obligation to give up the benefit which has accrued to the mandatory, or the “fiduciary”, as a consequence of his wrong, for instance a bribe. Indeed, academic commentators have remarked187 that the mandatory must give up to the mandator every enrichment which finds its cause in the mandate. One could argue with the German scholars that “everything” must mean also the gains made from a wrong. Yet this point is not argued directly in the literature and appears to be ignored by the judiciary.
On the basis of the German doctrine, the provision mentioned could give an adequate support to the theory of restitution for wrongs. There is no clear reason why Italian law should not be in line with English and German law. However, at present, it is not possible to say more on this than that the statutes do not exclude an award of restitutionary damages.
In the absence of any recognition of restitutionary damages, Italian law attempts to reach similar results through other avenues. However, the outcome of those attempts is unsatisfactory, especially if one contrasts them with the precise intervention which can be achieved through restitution for wrongs. This is possibly the area of law where the advantages of restitution for wrongs emerge most clearly.
The solutions which courts have adopted as “substitutes” for restitutionary damages can be likened to the instruments of the law of damages which can be found in the other legal systems under comparison. Yet it appears that, on this matter, the Italian authorities and literature do not behave as frankly and clearly as those in Germany. There is indeed no trace of the intense debate on the nature of damages granted as a response to a violation of personality rights which takes place in Germany, and it should be noted that the development of German law is normally closely examined in Italy. The compensatory function of such damages is not much questioned. To grant the kind of outcome which could be easily and straightforwardly reached through restitution for wrongs, the courts use both pecuniary and non-pecuniary damages.
Whenever possible, pecuniary damages are used as first resort for this purpose. The courts define this particular head of damages as the “price of the consent”. This is a legal figure which has already been commented upon above for English and German law. The Italian variation is as follows.
A very popular former cyclist founded his own bicycle company. For advertising purposes, he used a famous photograph showing himself and his traditional rival during the act of passing each other a bottle of water during a race. A few years later, the defendant, another bicycle-producer, utilised the same photograph in order to promote its products. The cyclist claimed compensation for the loss caused by the unauthorised use of his image188. The lower courts rejected the claim on the basis that the claimant had not been able to prove any loss which resulted from the exploitation of his image. The Court of Cassation reversed the decision of the Court of Appeal, observing that in such cases the damage consists of the loss of the concrete possibility of commercialising one”s image for the same kind of advertising, i.e. the fact that the commercial value of the cyclist’s image for the purpose of his own advertising was reduced through the use of the same image by the competition.
In this decision, the court did not advance any theory similar to the English doctrine of the lost opportunity to bargain and preferred the German variation. In fact, in the opinion of the court, the loss arises when the commercial value of the image is concretely affected, and not only as a consequence of the impossibility of the victim – any victim, not just the one who would have a valuable image to bargain with – to sell his image to the very defendant.
The courts derive their right to assess damages according to the so-called price of the consent theory from Art. 1226 c.c., which is expressly mentioned by Art. 2056 c.c. as a source for the measure of delictual damages. As has already been said, Art. 1226 c.c. empowers the courts to determine on an equitable basis those damages which cannot be proved in their exact amount. The necessity for technical discretion is justified with the impossibility of a precise quantification of damages in most of the cases involving a violation of personality rights189 .
The difficulties which are connected with the determination of pecuniary loss can be avoided by granting damages for non-pecuniary loss instead, which leaves much more room to the courts because of the nature of such damages, as the following case demonstrates.
A magazine published without authorisation excerpts from letters sent by a famous Italian writer to a person who secretly translated works from English into Italian on his behalf. The magazine used this correspondence as evidence that the author misappropriated work done by others as his own. As the writer himself was already deceased, his daughter claimed in delict against the unauthorised use of the letters, relying on the damage to the reputation of the author and the infringement of the right to privacy of correspondence190. The court held the defendant liable, but could not find any evidence of a pecuniary loss. Justifying damages as a reduction of the commercial value of the writer’s image would clearly have been considered as offensive to the memory of the author. Furthermore, a violation of Art. 70 Legge 22nd April 1941 No. 633 (Copyright Law) was ruled out, because the excerpts of the letters published were too short to activate the protection given by this statute.
As the court did not want the wrongdoer to get off scot-free, it allowed mo”ral damages” to be assessed in accordance with Art. 2059 c.c. In Italian law, compensatory damages which are awarded for non-pecuniary losses are called “moral damages”. (It might be considered more appropriate to use the English expression “non-pecuniary loss”, but in the context of Italian law a literal translation has been preferred.) The judgment referred to contains no precise reference to the criteria which apply to the quantification of such damages. The tribunal only mentions “the parameters which are normally adopted by this court in similar cases”. Such a statement provides obviously no information about any such parameters, leaving the court free to assess damages in a manner it thinks to be in accordance with justice. And indeed, the court used this freedom in a such a way that it enabled the judges to identify the measure of moral damages with the benefit which accrued to the agent as a consequence of the perpetration of the wrong.
Although such an expansion of the category of moral damages (i.e. to include part of the benefit gained by the wrongdoer) and the application of the “price of the consent doctrine” can reach results which are similar to those which restitutionary damages can achieve, there remain important differences. Moral damages are not as precise and not as efficient for redressing the consequences of a wrong as restitution for wrongs would be. Moreover, in many cases moral damages can not be used for compelling the wrongdoer to give up his enrichment. The function of the existing structures, as judicial authority191 is right to recognise, is mainly to punish the defendant for conduct which is reputed to be particularly blameworthy, or to grant the claimant strong protection for rights which can easily be violated by the agent with minimum risk. Hence, such damages fall within the area of exemplary damages. The Italian judiciary, in contrast to its German colleagues192, is brave enough not to hide behind a definition of compensation which is stretched far beyond its possible limits. Indeed, the courts admit that they are granting a mild form of exemplary damages, in the assessment of which the benefit gained by the wrongdoer can play a significant role.
An analysis of restitution for wrongs must devote some attention to this topic because it is in this context that the Italian legislator has for the first time made express mention of the gain made by the wrongdoer among the criteria which courts have to take into account when assessing damages. The following will discuss the impact which this reference to the defendant’s gain is likely to have on a theory of restitutionary damages. In particular, the question arises whether such a statement suggests the existence of restitutionary damages as a statutory institution.
Art. 18 of the Legge 8th July 1986 No. 349 describes the delictual framework as far as recovery for environmental losses is concerned. Art. 18 (1) states:
“Any fraudulent, malicious, or negligent act that, in violating statutory provisions, negatively affects the environment damaging, changing, deteriorating, or destroying it partially or totally obliges the person who has committed the act to pay damages to the State”.
There has been a long debate on the notion of environmental loss, which is still far from settled. The main explanation as to why a specific norm was required in order to protect the environment relates to the fact that the general delictual claim of Art. 2043 c.c. could not cover any environmental issue because the notion of “environment” is too abstract. Furthermore, it is said that it is often impossible to determine the victim of an environmental wrong. The aforementioned Art. 18 L. 346/1986 turns the State into environmental victim as the State, rather than the owner of the environmentally damaged area. Consequently, only the State is allowed to claim for damages under this provision.
A seminal decision193 of the Constitutional Court threw some light on the whole matter shortly after the law 346/1986 was enacted. The Court stated that the environment is a legal value which is protected by legal norms. The scarcity of natural environmental resources justifies and determines, according to the Court, the price being put on this legal value. Thus, the environment has an economic value although there is no concrete market value for it.
It is not clear thus far whether the response to the environmental loss should be classified under damages for pecuniary or for non-pecuniary losses. The literature seems to be oriented towards the second solution because, as it has been observed194 , environmental damage does not just consist of destroyed fauna. In fact, environmental damage does not affect concrete parts of the environment and therefore it cannot be quantified according to the Differenztheorie as the difference in its value before and after the damaging event195.
Art. 18 (6) L. 346/1986 recognises the difficulty in the quantification of environmental damages and consequently allows the judges to assess them by applying technical discretion according to the model depicted in Art. 1226 c.c. Yet, in comparison to Art. 1226 c.c., Art. 18 (6) L. 346/1986 presents some novel factors. In particular, it mentions “the benefit accrued to the wrongdoer as a consequence of his conduct in violating environmental values”. The analysis of environmental damages was prompted by the question whether it is possible to infer from L. 386/1986 that the legislator has codified restitutionary damages for the first time. No matter how tempting an answer in the affirmative might be, it does unfortunately not seem to be the case that environmental loss triggers restitutionary damages.
The reasons which compel this denial are the same which have been put forward above in each case in which restitution of the enrichment was not the only aim of the remedy in question. In fact, the benefit of the defendant is just one of the elements which the courts may consider in quantifying the consequences of a loss. Hence, the function of Art. 18 (6) L. 436/1986 on this point is to threaten potential wrongdoers, by seeking to ensure that the disadvantages which result from such a wrong exceed the advantages which can be gained. In other words, this appears to be yet another case of exemplary damages.
The punitive role of environmental damages and the deficiencies of the Differenztheorie are clearly understood by the judiciary, as the following case196 demonstrates.
A pharmaceutical company delivered some highly noxious substances to a company which provided storage facilities for such products. The container which was used for this purpose had a leak which allowed part of those substances to permeate into the earth and thus into the surrounding environment. In consequence, the government had to evacuate the entire area. The government subsequently sued the second company in delict, claiming inter alia environmental damages. However, the second company went bankrupt before this trial could begin. In consequence, the government sued the pharmaceutical company for environmental damages.
The claim succeeded. The court recognised the liability of the defendant on the basis of an omission of culpa in vigilando. Summarising the reasoning given by the judges, the pharmaceutical company was liable in delict even after having delivered the noxious substances to the second company, for it was held that handing over such substances to another party is not in itself sufficient to fulfil the duties connected with proper disposition. Rather, the pharmaceutical company should have checked the facilities which were used by the second company for storing such dangerous material before they entering into the contract with this company.
The court pointed out that environmental damages are not to be confused with the more direct damages for pecuniary loss which arise from the perpetration of the wrong, such as the costs of the elimination of the consequences of the inadequacy of the container. The environmental damage takes place immediately, but its consequences will be evident only as time goes by. More importantly within the present context, the court expressly stated that the Differenztheorie could not be applied because environmental damages are a type of civil punishment197, as is underlined by the elements which concur in the measure of damages: inter alia the malice of the wrongdoer and the benefit gained by him through the wrong.
There is no room for restitution for wrongs in environmental damages ex Art. 18 (6) L. 346/1986. The aim of the legislator was to punish the transgressor, not to strip him of the gains deriving from the delict.
There is one very interesting case198 which touches upon restitutionary damages, and it is interesting for what it does not say, and for the scholarly confusion it has caused. The following are the facts.
Naples City Council had learned that there were some buildings which were in such a disastrous condition that they could collapse at any moment. The Council put the claimant in charge of consolidation works which were so urgent that there was no time for the appropriate bureaucratic procedures. After the work was done, the Council refused payment on the ground that the contract with the claimant was void due to the lack of those formalities, so that no obligation rested upon the defendant Council to fulfil its contractual duties.
Such cases of the enrichment of public authorities are normally dealt with by the judiciary by applying the general enrichment claim of Art. 2041 c.c. From this point of view, the decision in question represents no exception: a claim was allowed for restitution of the unjust enrichment of the defendant. Yet, not content with such a traditional solution, the court also advanced principle, binding upon the lower court to which the case was referred, according to which the measure of the unjust enrichment was to be calculated by means of the parameters designated by Art. 1226 c.c.
That principle has been praised in the literature199 as an avenue for introducing restitution of an enrichment into delict law. Yet those scholarly comments seem to forget the function of Art. 1226 c.c. As has been seen, this provision finds application within the assessment of contractual and, by virtue of Art. 2056 c.c., of delictual damages. There is no reason to establish a link between this rule, which has only contractual and delictual relevance, and unjust enrichment: no provision of the law of unjust enrichment refers to Art. 1226 c.c. for the very simple reason that there is no need for it. The evaluation of an “unjust” enrichment already implies an amount of judicial discretion for establishing whether or not there is injustice in a transfer of wealth. Thus, the criterion contained in Art. 1226 c.c. cannot add anything meaningful to the task of the courts. Yet even if one wants to ignore that this provision has no bearing on the law of unjust enrichment and justify its application to unjust enrichment situation by way of an analogical extension of the technical discretion applicable under Art. 1226 c.c., how, from this analogical extension, could one infer a theory according to which restitution can all of a sudden be granted in delict law through Art. 1226 c.c.? What the judges attempted to do was to extend delictual rules to the law of unjust enrichment, not to introduce restitutionary damages into the law of delict.
Moreover, Art. 1226 c.c. gives technical discretion to the judges only for those situations when a damage is certain but cannot easily be proved. So this norm cannot be used as the sole basis for introducing a new head of damages which goes beyond the “general rule” of compensation laid down by Art. 2043 c.c. The difference between the two situations, technical discretion on the one hand, and the introduction of a new, non-compensatory head of damages into the system on the other, ought to be clear enough.
Hence, Art. 1226 c.c. cannot be used as a basis for a theory of restitutionary, or any other kind of non-compensatory, damages. In fact, any development of restitutionary damages on the basis of the existing codal provisions will be difficult because Art. 2043 c.c. refers to nothing but compensation as the aim of damages in delict. So the way forward seems to be to consider those statutory provisions as relating to compensatory damages alone, and to opt for an extra-codal, i.e. judicial development of other heads of damages.
This paper has primarily dealt with a comparative analysis of restitution for wrongs. Such an approach requires a clear understanding of the main terms and categories which are under comparison. For this reason, the topic has been approached through an examination of the meaning of “wrong”, of the relationship between “wrong” on the one hand, and of “tort”, “equitable wrong”, “delict”, and “breach of contract” on the other. Legal theoretical analysis has shown that the concept of a wrong has undergone a phase of development in the legal systems under comparison. English law has been particularly relevant in this context. The apparent conclusion is that a wrong is a breach of duty which, however is characterised differently in each legal system.
Having given the term “wrong” such a wide content, the subsequent step was to qualify “tort”, “equitable wrong”, “delict”, and “breach of contract” as breaches of duty. From this inference, it follows that “wrong” is a generic term which comprises the specific categories which have breach of duty as a common element. Thus, the relationship between “wrong” and “tort”, “equitable wrong”, “delict”, and “breach of contract” is one of genus to species . This understanding has made it possible to engage in a comparison of restitution for wrongs which also involves legal systems which do not understand all of those categories to form part of “wrongs”. In particular, a distinction between equitable wrongs and torts is alien to civil law systems, whereas in England the term “delict” has a technical meaning known mainly to legal historians.
The analysis of the three legal systems under comparison has shown that they all have some mechanism by which a wrongdoer can be compelled to give up to the victim the benefit which the former has derived from the wrong. The identification of these structures is probably the most important outcome of the present article. In addition, the analysis of scholarly and judicial reactions to the notion of restitution for wrongs has proven to be relevant. It is interesting to observe that each one of the three systems under comparison appears to have chosen a different, characteristic way to deal with this issue and has thus produced a different response.
Amongst those three legal systems, the English is the most conscious of the presence of the restitutionary structure described above. Indeed, only the English judiciary calls “a spade a spade”200, i.e. it mentions this category expressis verbis . The term “restitution for wrongs” or similar expressions are practically unknown in the two civil law systems under consideration.
German lawyers may ignore the denomination. Yet it has been demonstrated that in the practical application of the law German law resorts to restitutionary response to wrongs in some situations, which range from the violation of intellectual property rights to the contractual remedies for breach of contract.
Italian law has proved to be more resistant to the introduction of restitutionary remedies for wrongs. Even where the traditionally conservative German school of thought has adopted such remedies, or structures which produce an equivalent result, Italian law tends to deny any recognition to gain-based awards. Is there any rationale behind this progressive conduct on the part of the English courts, which traditionally tend to be very cautious in their decisions, and behind the more conservative reaction of civilian systems? The following considerations may help to understand this phenomenon.
First, there are reasons which apply to all jurisdictions under comparison. The principal obstacle is seen in the major challenge which a restitutionary model poses against the compensatory principle. In modern legal systems, but not in Roman law, the paramount function of the law of damages both in tort/delict and in contract is to make good the loss suffered by the victim et non plus ultra. All three legal systems under consideration deal primarily with this issue, viz. how to make good a loss, when they define the rights which arise from a breach of duty. While the concept of a remedial right as a response to a loss suffered by the victim can be grasped instantly and almost intuitively as the main function of this field of the law, the idea that the wrongdoer could be obliged to give up his benefit is in tension with pre-existing compensatory biases. This triggers some difficulties in the relationship between these two different heads of damages, including questions of concurrent liability.
Another factor which ought not to be underestimated is the worry on the part of courts and legislators that they might not be able to cope with restitutionary damages in practice. It is probably mostly the fear of the consequences engendered by this new category of damages which hinders the recognition of restitution for wrongs in the legal systems under comparison.
Those difficulties are aggravated by the fact that the different instances of restitution for wrongs are scattered across different areas of the law of obligations. This has prevented the different cases of restitutionary damages from being understood as belonging to one and the same category, and has contributed to the widespread notion that restitutionary damages do not, or ought not to, exist. Even English law, which presents the most developed system of gain-based remedies for wrongs, finds it difficult to accept the instances examined in this paper as different examples of one single institution, as is illustrated by the use of different labels such as “restitutionary damages”, “account of profits” and the like. This leads to a certain degree of uncertainty. The consequences of this uncertainty are most serious in those legal systems in which legal dogma plays a larger role. As a result, there is a palpable risk that the legal analysis in the two civilian systems under consideration will be based on the wrong taxonomy. Some cases of confusion between restitution for wrongs and restitution for unjustified enrichment by scholars with a strong dogmatic background demonstrate that this risk is more than theoretical.
However, the main reason why English law evolves faster than the civilian jurisdictions in this area of law is to be found outside the law of wrongs. Both the German and the Italian legal systems have developed a mechanism which is not based on wrongs, but has an area of application which overlaps with restitution for wrongs. The Germans have their Nichtleistungskondiktion under § 812 (1) BGB. The Italians use as ultimate resort the general enrichment claim of Art. 2041 c.c. As has been shown, both instruments produce unsatisfactory results when they are utilised as substitutes for restitution for wrongs. Nevertheless, their presence eases the pressure upon legislator and judiciary alike, which can adapt the existing instruments to the most compelling cases, thus granting at least partial relief to the victim of a wrong where justice requires redress even in the absence of a loss. This is all the more true for Italian law, in which the general enrichment claim is much more flexible than the German counterpart and has therefore a wider radius of application. The presence of this claim is likely to furnish the central explanation for the restrained approach taken by Italian law.
In comparison to the German and Italian system, the English system of unjustified/unjust enrichment is still underdeveloped. Hence, the judiciary, but also the legislator had to work out a different solution, as is illustrated by cases of violation of intellectual property rights. This solution developed from the law of damages as applied to tort, contract and equity cases.
The result of this English legal invention appears to be more satisfactory than the solutions reached in the other two legal systems: by applying restitution for wrongs, the question of redressing an unjust situation in which the wrongdoer takes profit from his own wrong can be tackled with greater accuracy.
As for the relationship between restitution for wrongs and restitution for unjust/unjustified enrichment, it is best illustrated by the term “restitutionary damages”, which emphasises that these are damages which are triggered by a wrong. The law of damages does not pertain to the law of unjust/unjustified enrichment, since restitutionary rights are not based upon the commission of a wrong. In other words, the right granted to the impoverished party is not a consequence of a wrongdoing on the part of the enriched. It is true that the two legal tools can sometimes overlap. Yet they remain different instruments which reach different results, as has been shown above. Indeed, it is possible that the same set of facts may give rise to two restitutionary actions, one based upon a wrong and the other upon an unjust/unjustified enrichment, which lead to heterogeneous outcomes, as the analysis of the Mahesan201 type of situation has revealed.
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* I am grateful to Professor P. Birks, Professor A. Burrows, and Dr S. Enchelmeier for their useful comments on earlier drafts of this paper, which is part of a larger project on a legal theoretical analysis of restitution for wrongs, and thus to be considered “work in progress”.
1 The Law Commission Report No 247 recommends that a plurality of labels, such as “money had and received”, acc”ount of profits”, and indeed “restitution for wrongs” ought to be abandoned in favour of the single term “restitutionary damages”. See Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com No. 247, 1997) Part III, paras. 1.82-1.84.
2 P. Birks, An Introduction to the Law of Restitution (revised edn., Oxford, 1989), 13.
3 The Italian verb is “restituire .
4 Lipkin Gorman v Karpnale Ltd.  2 AC 548 (HL).
5 See P. Birks, An Introduction to the Law of Restitution (revised edn., Oxford, 1989), 16-22.
6 P.H. Winfield, The Province of the Law of Tort (Cambridge, 1931) 32.
7 German Bundesgerichtshof (BGH) (1961) BGHZ 34, 375, 380.
8 cf Surrey C.C. v. Bredero Homes Ltd.  1 WLR 1361 (CA) 1371 (per Steyn LJ): “[g]iven the fact of the breach of contract the only question is whether restitution is an appropriate remedy for this wrong”.
9 cf G. Virgo, The Principles of the Law of Restitution (Oxford, 1999), 512.
10 e.g. Staudinger /Schäfer, ‘Vorbem. zu §§ 823 ff.’, para. 32.
11 ex multis W.V.H. Rogers, Winfield and Jolowicz on Tort (15th edn, London, 1998), 14-15.
12 See, for instance, Moffat, Trust Law – Text and Materials (3rd edn., London, 1999), Chapter 16 on fiduciary relationships.
13 For instance R.F.V. Heuston and R.A. Buckley, Salmond and Heuston on the Law of Torts (21 st edn., London, 1996) 12: “[t]he reason for this exclusion is historical only”.
14 cf. the definition of torts given in Salmond and Heuston on the Law of Torts, ibid., 13.
15 P.H. Winfield, The Province of the Law of Tort (Cambridge, 1931) 231.
16 Surrey C.C. v. Bredero Homes Ltd  1 WLR 1361 (CA) 1370.
17 E.g., the Italian Corte di Cassazione, 11th November 1978 No. 4538, Repertorio Foro italiano , 1978, Danni civili, No. 67.
18 In particular, this depends on whether a stricter or more lenient interpretation is applied.
19 United Australia Ltd v. Barclays Bank Ltd  AC 1 (HL).
20 Lamine v. Dorrell (1701) 2 Ld. Raym. 1216, 92 ER 303.
21 United Australia Ltd. v. Barclays Bank Ltd.  AC 1 (HL) 29-30 (per Lord Atkin).
22 ibid., 12 (per Viscount Simon LC).
23 ibid., 28 (per Lord Atkin): “[h]aving recovered in contract it is plain that the claimant cannot go on to recover in tort”.
24 ibid., 19 (per Viscount Simon LC), emphasis added.
25 G. Virgo, The Principles of theLaw of Restitution (Oxford, 1999), 490.
27 cf. the “second category” of exemplary damages depicted in Rookes v. Barnard  AC 1129 (HL) 1226-1227 (per Lord Devlin): cases “in which the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the claimant”.
28 Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com. No. 247, 1997) Part III, para. 1.2.
29 J.G. Fleming, The Law of Torts (9th edn., North Ryde NSW and others, 1998), 62, using the same example.
30 ibid., 54.
31 Ministry of Defence v. Ashman (1993) 66 P & CR 195 (CA).
32 Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com. No. 247, 1997) Part III, para. 1.12.
33 Ministry of Defence v. Ashman (1993) 66 P & CR 195 (CA) 200 (per Hoffman LJ).
34 ibid., 202-205 ( per Lloyd LJ).
35 Wrotham Park Estate Co Ltd v. Parkside Homes Ltd  1 WLR 798.
36 Livingstone v. The Rawyards Coal Company (1880) 5 AC 25 (HL).
37 Wrotham Park Estate Co Ltd v. Parkside Homes Ltd.  1 WLR 798, 815 (per Brightman J).
38 ibid., 815.
39 R.J. Sharpe and S.M. Waddams, ‘Damages for Lost Opportunity to Bargain’  2 OJLS 290-297.
40 Chaplin v. Hicks  2 KB 786 (CA); Allied Maples Group Ltd v. Simmons & Simmons  1 WLR 1602 (CA).
41 Surrey C.C. v. Bredero Homes Ltd.  1 WLR 1361 (CA) 1369 (per Steyn LJ).
42 Jaggard v. Sawyer  1 WLR 269 (CA) 291 (per Millett LJ).
43 Surrey C.C. v. Bredero Homes Ltd.  1 WLR 1361 (CA).
44 Strand Electric & Engineering Co. Ltd. V. Brisford Entertainments Ltd.  2 QB 246 (CA).
45 ibid., 250 (per Somervell LJ).
46 ibid., 252 (per Somervell LJ).
47 ibid., 256-257 ( per Romer LJ).
48 ibid., 255 (per Denning LJ).
49 ibid., 255 (per Denning LJ).
50 Translation by S.L. Goren, The German Civil Code (rev’d edn., Littleton, Colorado, 1994).
51 P. Schlechtriem, Schuldrecht Besonderer Teil (4th edn., Tübingen, 1995) para 641.
52 (1971) BGHZ 55, 128. For an English translation, see http://www.iuscomp.org/gla/judgments/bgh/z710107.htm
53 (1964) BGHZ 40, 272, 278.
54 Follow the debate on the Nichtleistungskondiktion in Reuter and Martinek, Ungerechtfertigte Bereicherung (Tübingen, 1983), 232-38.
55 T. Mahesan S/O Thambiah v. Malaysia Government Officer’s Co-op. Housing Society Ltd.  AC 374 (PC).
57 Translation by M. Beltramo, G. Longo and J.H. Merryman, The Italian Civil Code (New York, 1969).
58 cf. B. Nicholas, ‘Unjust Enrichment and Subsidiarity’ in F. Santoro Passarelli and M. Lupoi (eds.) Scintillae iuris:Studi in memoria di Gino Gorla, Vol. III (Milano, 1994) 2037-2045.
59 Art. 2056 c.c., which determines the measure of damages in the law of delict, refers to this purpose to some of the corresponding provisions of the law of contract, among which Art. 1223 c.c. has particular significance. Art. 1223 c.c. provides that “the measure of damages arising from non-performance or delay shall include he loss sustained by the creditor and the lost profits insofar as they are a direct and immediate consequence of the non-performance or delay” (Translation by M. Beltramo, G. Longo and J.H. Merryman, The Italian Civil Code (New York, 1969).
60 In effect, Art. 1223 cc does have one very important exception in Art. 1226 c.c., which will be examined later on. This exception allows the courts to exert technical discretion in assessing damages which cannot be proved precisely.
61 T. Mahesan S/O Thambiah v. Malaysia Government Officer’s Co-op. Housing Society Ltd.  AC 374 (PC).
62 cf. Cassazione, 10th February 1993 No. 1686,  Giustizia civile, I, 1836.
63 F. Astone, L’arricchimento senza causa (Milano, 1999), 72.
64 C.M. Bianca, ‘Dell’inadempimento delle obbligazioni’, Commentario del codice civile a cura di A. Scialoja e G. Branca (2nd edn., Bologna/Roma, 1979) 388-394.
65 P.G. Monateri, Le Fonti delle Obbligazioni, 3, La Responsabilità Civile, in R. Sacco (ed.) Trattato di Diritto Civile (Torino, 1998), 337.
66 Cassazione, 12th April 1995 No. 4192,  Foro italiano, I, 1716. As this decision does not concern proprietary wrongs, it will be examined under the category o”ther wrongs”.
67 My Kinda Town Ltd v. Soll  8 FSR 147; Rickless v. United Artists Corp.  QB 40 (CA); see below.
68 This seems to be the most recent line of reasoning followed by H. McGregor, ‘Restitutionary Damages’, in P. Birks (ed.), Wrongs and Remedies in the Twenty-First Century (Oxford, 1996), 203-216, esp. 205-207.
69 c, 156 (per Slade J).
70 Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com. No. 247, 1997) recommendation 14.
71 My Kinda Town Ltd v. Soll  8 FSR 147, 148.
72 cf. s. 61 (2) Patents Act 1977.
73 See, for instance, Rickless v. United Artists Corp.  QB 40 (CA).
74 Potton Ltd. V. Yorkclose Ltd.  FSR 11, 15.
75 cf. A. Burrows, Remedies for Tort and Breach of Contract (2nd edn., London, 1994) 287-288.
76 (1895) RGZ 35, 63 (Ariston case).
77 ibid, 69.
78 H.D. Assmann, ‘Schadensersatz in mehrfacher Höhe des Schadens’,  Betriebs-Berater, 15-25, 17.
79 Ex multis, (1993) BGHZ 119, 20; BGH  Neue Juristische Wochenschrift, 1989.
80 (1980) BGHZ 77, 17.
81 (1977) BGHZ 68, 90.
82 (1966) BGHZ 44, 372.
83 (1972) BGHZ 57, 116, 118.
84 ibid, 119.
85 Thus H Lange, Schadensersatz Vol I (2nd edn, Tübingen, 1990), 9
86 On the hypothetical license fees as a delictual measure of damages see BGH  Neue Juristische Wochenschrift, 1151 (Schadensersatzlizenz im Wege der Lizenzanalogie ).
87 For instance, MünchKomm/Grunsky, § 252 para. 16; Staudinger/Schiemann, § 249 para. 201.
88 Translation by S.L. Goren, The German Civil Code (rev’d edn., Littleton, Colorado, 1994).
89 Staudinger/Schiemann, § 249, para 201 .
90 See F. Bydlinski, System und Prinzipien des Privatrechts (Wien, 1996) 185-189.
91 Cassazione, 21st October 1988 No. 5716,  Foro italiano, I, 764.
92 cf. G. Ghidini, Della concorrenza sleale, in P. Schlesinger (ed.), Il codice civile – Commentario (Milano 1994), 430-431.
94 Appello Milano, 23rd December 1986,  Repertorio Foro italiano, Danni civili, No. 185.
95 Cassazione, 24th October 1983 No. 6251,  Repertorio Foro italiano, Danni civili, No. 140.
96 For instance, Tribunale Milano, 20th June 1988,  Diritto dell’Informazione e dell’Informatica, 878.
97 [(1972) BGHZ 57, 116, 119.]
98 Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com. No. 247, 1997) Part III, para. 1.37.
99 A-G v. Blake  1 AC 268 (HL) 291 (per Lord Steyn).
100 ibid., 284 (per Lord Nicholls).
101 A-G v. Blake,  1 All ER 833 (CA) 845 (per Lord Woolf MR).
102 To be precise, only one day separated the Report from the decision in question. See on the latter G. Virgo, ‘Clarifying Restitution for Wrongs’,  RLR 118-126.
103 See Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com No 247, 1997) Part VI, Recommendation No 6
104 A-G v. Blake  1 AC 268 (HL) 285 (per Lord Nicholls).
105 Surrey C.C. v. Bredero Homes Ltd.  1 WLR 1361 (CA).
106 ibid., 1364 ( per Dillon LJ).
107 ibid., 1365 ( per Dillon LJ).
108 Hadley v. Baxendale (1854) 9 Ex 341; 156 ER 145.
109 Livingstone v. The Rawyards Coal Company (1880) 5 AC 25 (HL) 39 (per Lord Blackburn).
110 Surrey C.C. v. Bredero Homes Ltd.  1 WLR 1361 (CA) 1369-1379 (per Steyn LJ).
112 Law Commission: Aggravated, Exemplary and Restitutionary Damages (Law Com. No. 247, 1997) Part III, para. 1.46.
113 Nottingham University v. Fishel,  IRLR 471.
114 A-G v. Blake  1 AC 268 (HL) 299 (per Lord Hobhouse).
115 Surrey C.C. v. Bredero Homes Ltd  1 WLR 1361 (CA) 1371 (per Steyn LJ).
116 A-G v. Blake  1 AC 283 (HL) 964 (per Lord Nicholls).
117 See W. Goodhart, ‘Restitutionary Damages for Breach of Contract’,  RLR 3-14, 9.
118 Wrotham Park Estate Co. v. Parkside Homes Ltd.  1 WLR 798.
119 Jaggard v. Sawyer  1 WLR 269 (CA).
120 Thus, correctly, W. Goodhart, ‘Restitutionary Damages for Breach of Contract’,  RLR 3-14, 4, 9.
121 cf. Penarth Dock Engineering Co. v. Pounds  1 Lloyd’s Rep 359; Swordheath Properties Ltd. v. Tabet  1 WLR 285 (CA).
122 Whitwam v. Westminster Brimbo Coal & Coke Co.  2 Ch 538.
123 Jaggard v. Sawyer  1 WLR 269 (CA).
124 Jaggard v. Sawyer  1 WLR 269 (CA) 281 (per Sir Bingham MR).
125 See above, n. 39 and text thereof.
126 On this, see P. Birks, ‘Profits of Breach of Contract’, (1993) 109 LQR, 518-521, 519: “[t]he law is deficient when a legitimate interest cannot be safeguarded against such opportunism”.
127 (1961) BGHZ 34, 375, 380.
128 Staudinger/Schäfer, ‘Vorbem. zu §§ 823 ff.’, para. 32.
129 Translation by S.L. Goren, The German Civil Code (rev’d edn., Littleton, Colorado, 1994).
130 But see P. Schlechtriem ‘Some Thoughts on the Decision of the BGH concerning Princess Caroline of Monaco”, in B. Markesinis (ed.), Protecting Privacy – The Clifford Chance Lectures (Vol. 4, Oxford, 1999) 131-138, 133), who seems to think that restitutionary damages could be led back to para 823 (1) BGB. Unfortunately, he does not provide any explanation of the relation which, in his opinion, should link that provision with restitutionary damages.
131 Translation by S.L. Goren, The German Civil Code (rev’d edn., Littleton, Colorado, 1994).
132 H. Lange, Schadensersatz (Tübingen 1979) 6.
133 MünchKomm/Grunsky, ‘Vor § 249’, para. 6.
134 (1993) BGHZ 118, 312, 338.
135 OLG Braunschweig, (1891) 46 Seuffert’s Archiv für Entscheidungen der Oberste Gerichte in den deutschen Staaten, No. 173, 272.
136 (1967) BGHZ 46, 260.
137 ibid., 264: “ Identität zwischem geschuldetem und ersetztem Gegenstand” .
138 Staudinger/Löwisch, § 281 para. 29; MünchKomm/Emmerich, § 281 para. 16.
139 MünchKomm/Lieb, § 818 para. 1;H Grothe, § 346, in Bamberger/Roth (eds.) Kommentar zum Bürgerlichen Gesetzbuch (München, 2001), para. 1.
140 Grothe ibid, para. 19.
141 Grothe ibid, para. 1.
142 P. Schlechtriem, Schuldrecht Besonderer Teil (5th edn., Tübingen, 1998) para. 698.
143 Grothe ibid , § 347 para. 1
144 MünchKomm/Emmerich. § 281 para. 5.
145 (1980) BGHZ 75, 203. The case has been slightly modified for easier understanding of non-German lawyers.
146 (1980) BGHZ 75, 203, 206.
147 MünchKomm/Emmerich. § 281 para. 5.
148 RGRK/Alff, § 281 para. 12.
149 Translation by R. Youngs, Sourcebook on German Law (London, repr. 1998) 309.
150 P.G. Monateri, Le Fonti delle Obbligazioni, 3, La Responsabilità Civile, in R. Sacco (ed.) Trattato di Diritto Civile (Torino, 1998), 225-226.
151 Translation by M. Beltramo, G. Longo and J.H. Merryman, The Italian Civil Code (New York, 1969).
152 CM Bianca, ‘Dell’inadempimento delle obbligazioni, Art 1218-1229’, in A. Scialoja and G. Branca (eds.) Commentario del Codice civile (2nd edn., Bologna-Roma, 1979) 249.
153 Translation by M. Beltramo, G. Longo and J.H. Merryman, The Italian Civil Code (New York, 1969).
154 Translation by M. Beltramo, G. Longo and J.H. Merryman, The Italian Civil Code (New York, 1969).
155 A-G v. Blake  1 AC 268 (HL).
156 Regal (Hastings) Ltd. v. Gulliver  1 All ER 378 (HL) 392 (per Lord Wright).
157 Boardman v. Phipps  2 AC 46 (HL).
158 Peter Pan Manufacturing Corp. v. Corsets Silhouette Ltd.  1 WLR 96, 108 (per Pennycuick J).
159 A. Burrows, Remedies for Tort and Breach of Contract (2nd edn., London, 1994) 181.
160 A-G v. Guardian Newspapers Ltd. (No. 2)  1 AC 109 (HL).
161 ibid., 262 (per Lord Keith).
162 ibid., 286 (per Lord Goff).
163 See above (n. 55 and text thereof).
164 (1963) BGHZ 38, 171. The case has been much simplified for explanatory purposes.
165 Translation by CH.. Wang, The German Civil Code (London, 1907).
167 (1963) BGHZ 39, 1; more generally BGH  Neue Juristische Wochenschrift, 1224.
168 Staudinger/Wittmann, § 667 para. 9; contra MünchKomm/Seiler, § 667 para 17.
169 Staudinger/Wittmann, ibid.
170 (1972) BGHZ 57, 116, 122 ( Wandsteckdose II case).
171 BGH  Gewerblicher Rechtsschutz und Urheberrecht, 539 (Prozeßrechner case).
172 MünchKomm/Grunsky, § 252 para. 16.
173 (1956) BGHZ 20, 345.
174 ibid, 353.
176 Translation by S.L. Goren, The German Civil Code (rev’d edn., Littleton, Colorado, 1994).
177 (1958) BGHZ 26, 349, 355-356.
178 For instance see (1960) BGHZ 30, 7 (Caterina Valente case); and BGH  Neue Juristische Wochenschrift, 698.
180 ibid., 16
181 W. Seitz, ‘Prinz und Prinzessin – Wandlungen des Deliktsrechts durch Zwangskommerzialisierung der Persönlichkeit’,  Neue Juristische Wochenschrift, 2848-2850. For a minority perspective which reads the Caroline case as granting exemplary damages, see J. Rosengarten, ‘Der Präventionsgedanke im deutschen Zivilrecht’,  Neue Juristische Wochenschrift, 1935-1938.
182 (1993) BGHZ 118, 312, 338.
183 P. Schlechtriem, ‘Bereicherungsansprüche wegen Persönlichkeitsverletzung’, Festschrift für W. Hefermehl zum 70. Geburstag (München, 1976) 445-465.
184 P. Schlechtriem, ‘Some Thoughts on the Decision of the BGH concerning Princess Caroline of Monaco’, in B. Markesinis (ed.) Protecting Privacy, The Clifford Chance Lectures Vol. 4 (Oxford, 1999) 131-138.
185 See above (n 55 and text thereof).
186 Translation by M. Beltramo, G. Longo and JH.. Merryman, The Italian Civil Code (New York, 1969).
187 G. Cian and A. Trabucchi, Commentario breve al codice civile (5th edn., Padova, 1997) Art 1713, III.
188 Cassazione, 6th February 1993 No. 1503,  Foro italiano, I, 1617 (Bartali case).
189 Tribunale Roma, 22 nd December 1994,  Foro italiano, I, 2285.
190 Tribunale Milano, 30 th June 1994,  Foro italiano, I, 1667 (Vittorini case).
191 Appello Milano, 23 rd December 1986,  Repertorio Foro italiano, Danni civili, No. 95.
192 cf. the discussion about the Caroline von Monaco case (above n. 179 and text thereof).
193 Corte Costituzionale, 30 th December 1987 No. 641,  Foro italiano, I, 93.
194 C. Castronovo, ‘Il danno all’ambiente nel sistema di responsabilità civile’, in La nuova responsabilità civile (2nd edn., Milano, 1997), 333-347, 337-338.
195 Cassazione, 9th April 1992 No. 4362,  Massimario Giurisprudenza italiana.
196 Cassazione, 1st September 1995 No. 9211,  Giustizia civile, 777.
197 ibid., 780
198 Cassazione, 12th April 1995 No. 4192,  Foro italiano, I, 1716.
199 P.G Monateri, Le Fonti delle Obbligazioni, 3, La Responsabilità Civile, in R. Sacco (ed.) Trattato di Diritto Civile (Torino, 1998), 336-337.
200 Ministry of Defence v. Ashman (1993) 66 P & CR 195 (CA) 201 (per Hoffmann LJ).
201 T. Mahesan S/O Thambiah v. Malaysia Government Officer’s Co-op. Housing Society Ltd.  AC 374 (PC).
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