Subjective devaluation unfairly favours the claimant

'The law relating to subjective devaluation unfairly favours the claimant to the detriment of the defendant'. Critically Discuss.

‘You return from a vacation to find that your driveway has been paved over mistakenly by a paving company, making it smooth and increasing the resale value of your property. However, you personally preferred the look and feel of loose gravel and have better things to do with your money than spend it on your driveway.' [i] Should the law require the defendant’s to pay for the mistaken improvements to their property where the improvements have increased the market value of the property even though they didn’t want the improvements and personally preferred how it was before?

The law on unjust enrichment especially in the area of mistake has developed at an unprecedented pace in the last few years and has been the focus of much debate by academics and the courts as they strive to find the balance between compensating the plaintiff for benefit they mistakenly conferred on the defendant without their free acceptance and making the defendant pay for a gain which they did not ask for nor want. Currently, the courts operate a causative mistake approach, so that ‘if the claimant’s mistaken belief causes the claimant to enrich the defendant, the claimant is prima facie to succeed.’ [ii] .

However, when a defendant subjectively devalues the benefit conferred on them without free acceptance, there is no enrichment and therefore the principles of unjust enrichment do not support recovery by the plaintiff. As the defendant has committed no wrong in receiving the objective ‘benefit’, it would be unjust to force the defendant to pay for something he or she does not value by altering the defendant’s priorities.

Subjective devaluation can therefore leave apparently innocent plaintiff’s without recovery while the defendant enjoys the value of an objective benefit mistakenly conferred, for example, if the plaintiffs were supposed to pave the neighbour’s driveway; not the defendant’s. Misplaced sympathy for such plaintiff’s has led academics and the court’s alike to develop the doctrine of incontrovertible benefit in order to place liability on defendants. This doctrine would therefore allow the plaintiff to recover when the objective benefit can be realised in monetary terms by the defendant. This becomes somewhat problematic where property land is the subject of the enrichment when the improvement will contribute to an increase in the market value of the property. Should the improvement be subjectively devalued as the recipient’s didn’t want for it, or should the plaintiff be entitled to payment as a result that it ‘added-value’ to the property at their detriment? The problem clearly occurs when the owners of the property do not wish to sell for a considerable while so won’t reap the rewards for a long period of time or if the owners in fact never sell the property at all.

In the case of a mistaken improvement to the defendant's property, the doctrine of incontrovertible benefit would impose liability on the defendant because the improved property could be sold, the value of the improvement realised in money [iii] and that value returned to the plaintiff. With the remainder, the defendant could purchase a substitute piece of property with the preferred characteristics [iv] . Therefore, in the aforementioned situation regarding the driveway being paved, the doctrine of incontrovertible benefit threatens to impose liability on the defendant’s because the improvement to the driveway is realisable in money if you were to go through the trouble of selling your house.

This doctrine of incontrovertible benefit seems to interfere with the freedom and priorities of a defendant and their ability to choose where and how the live when no wrong has been committed? For example, no property and piece of land is identical to another and each has its own characteristics and is of great value, emotional and financially, to the defendant and therefore often irreplaceable. Whilst the doctrine of incontrovertible benefit is gathering steam, it must be noted that in virtually every instance where the courts have found an incontrovertible benefit, it has been the case that the facts were such that it was impossible for the defendant to argue subjective devaluation.

On the other hand, if the plaintiff is providing a service of so much value that they feel the need to take the matter to court to recover the loss; shouldn’t it be the responsibility of the plaintiff to make sure the defendant wishes to receive said goods or services?

Goff and Jones write "In restitution it is not material that the plaintiff has suffered a loss if the defendant has gained no benefit" [v] . In many cases where the plaintiff has rendered a service to the defendant’s property, a ‘benefit’ in the ordinary sense is said to be conferred on the defendant since the plaintiff’s actions resulted in a positive economic result in terms of an increase in the property’s market value. However, these benefits may not be regarded as highly, or in fact at all, by the defendant. It is here that subjective devaluation provides a response for the defendant against a claim by the plaintiff of unjust enrichment, by arguing that whilst others may value the goods consumed or the services provided by the plaintiff, the defendant does not; Professor Birks recognises that ‘one man’s meat is another man’s poison’ [vi] .

Subjective devaluation is only available to defendants where there is no existence of free acceptance. A defendant who knows that there is a non-gratuitous benefit being offered, and having the opportunity to object, chooses not to, is considered to have indicated that the particular benefit being offered is in fact a subjective benefit to receive those goods or services.

Falcke recognised that "Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will" [vii] , and this has been the clear and concise way the law has dealt with situations for centuries, such as the one i mentioned earlier regarding the driveway, until the recent development of incontrovertible benefit.

The doctrine of incontrovertible benefit, as created by a number of influential scholars, encompasses two basic ideas. Goff and Jones believe that restitutionary relief should be granted where ‘it can be shown that the defendant has gained a financial benefit readily realisable, without detriment to himself, or has been saved an inevitable expense.' [viii] Birks wrote that a defendant would deemed to have received an incontrovertible benefit and recovery would be granted to the plaintiff in two types of situations: first, where the plaintiff has conferred a benefit on the defendant which was necessary to the defendant in the sense that he would have otherwise actively sought to receive the benefit himself [ix] , (anticipation of necessary expenditure), and second, where ‘the recipient of a benefit which can be turned into money does turn it into money [such that] he can no longer resort to subjective devaluation’ [x] (realisation in money).

Lord Denning’s dissenting judgement in Greenwood v Bennett is the genesis of the doctrine of incontrovertible benefit. Lord Denning M.R. noted that there were familiar cases which say that a man is not entitled to compensation for work done on the goods or property of another unless there is a contract express or implied, to pay for it, and referred to the saying by Pollock C.B.: "One cleans another's shoes; what can the other do but put them on?" [xi] . That is undoubtedly the law when the person who does the work knows, or ought to know, that the property does not belong to him. He takes the risk of not being paid for his work on it. But, he stated, ‘it is very different when he honestly believes himself to be the owner of the property and does the work in that belief’ [xii] . As a result of Lord Denning's lone opinion in Greenwood, some academics, including Goff and Jones, have concluded that where the plaintiff mistakenly improves the defendant's chattels, even without request or free acceptance by the defendant, the defendant must pay the plaintiff for the objective value of those services on a ‘quantum meruit’ (the amount earned) [xiii] basis because the services are realisable in money.

Greenwood did not call on the Court to alter the fundamental principle of subjective devaluation; rather, this is a case where the facts did not allow for a persuasive claim of subjective devaluation. On most occasions it will be that the facts did not allow a persuasive claim of subjective devaluation because the plaintiff will have many more lines of arguments to support their claims than the defendant has to defend themselves, such as realisable in money, or inevitable expense [xiv] .

The fallacy behind the doctrine of incontrovertible benefit becomes somewhat apparent when one explores the principles which underline the law of restitution. The indication of benefits is one of the ways restitution recognises restitution should require a defendant centred approach, in that everyone has the right to order their own priorities. It derives, in large, from the lack of actionable wrong in receiving the benefit on the defendant’s part, as if there is one, the plaintiff would be able to recover in contract or tort. Assuming a recognised benefit to the defendant, the third stage of the test for unjust enrichment asks the court to consider whether it would be unjust for the defendant to retain the benefit; it is the retention as opposed to the receipt of that benefit that they are/should be concerned with [xv] .

Many academics are too quick to recognise that it would be unjust that the plaintiff provided a service unofficiously but received nothing in return. Whilst the injustice to the plaintiff might be illuminating, we need to recall that restitution is granted where it would be unjust for the defendant to retain the benefit. The defendant’s perspective must not be undermined or underestimated as it is the sine qua non of restitution and what distinguishes it from contract and tort. Therefore, ‘injustice’ must take into account not only what is fair to the plaintiff; it must also consider what is fair to the defendant [xvi] . McLauchlin J in Peel highlighted the heightened concern for the defendant’s point of view in restititution, as opposed to in contract and tort: “it is not enough that the plaintiff has made a payment or rendered services which it was not obliged to make or provide – it must also be shown that the defendant, as a consequence, is in possession of a benefit, and it is fair and just to disgorge that benefit" [xvii] .

An example of where resititution recognises that the defendants situation if of paramount concern is in the change of position doctrine. This defence enables

a defendant who is otherwise liable in restitution to avoid or diminish liability

where circumstances have changed since the receipt of the benefit such that full restitution

would leave the defendant in a worse position than before and it would thus be

inequitable to require full restitution [xviii] . Once again, in these circumstances it is the plaintiff that made the mistake, whilst the defendant did nothing wrong, and Lord Goff said in Lipkin Gorman “the injustice of requiring (the defendant) to repay outweighs the injustice of denying the plaintiff restitution" [xix] . The change of position defence thus reflects restitutions particular concern with fairness to the defendant (who we must note has done nothing wrong by merely receiving the benefit), especially at “the enrichment stage of the analysis before the question of whether it is just for the defendant to retain the benefit has even arisen" [xx] .

More fundamentally, private law is “rooted in notions of human liberty" in that it accepts that every individual has normative rights, and it is then to be left free to those individuals to exercise those rights as they see fit, so long as they do not interfere with those similar rights of others, for example by entering into a contract freely at one’s own will. “This freedom to order one’s own priorities, limited of course by the respect for others’ rights to do the same, also informs the law of restitution" [xxi] . Restitution has barred claims from officious intermeddlers who seek to exploit individuals’ freedom of choice, such as car washers at intersections. The law refuses to tolerate such blatant and unjustified attempts to interfere with an individuals’ right to order their own priorities.

The plaintiff’s success in a claim for restitution involves reordering the defendant’s priorities by making them pay damages in money or perhaps carving out a lien on property legally owned by the defendant. If there is no material benefit in the defendant’s hands, however, ordering payment of damages to the plaintiff in effect leaves the defendant worse off than before and forces a reordering of priorities, even though nothing normatively wrong was done. Imposing liability on the defendant in such a case is in effect a violation of the right to order personal priorities.

It is hard to find an approach to the law surrounding subjective devaluation which would achieve a fair and just result in every case as the circumstances in which individuals can be unjustly enriched are endless and unpredictable, with each case surrounding itself with its own unique set of facts. One possible solution, which I mentioned earlier, would be to draw a distinction between land and chattels, and providing two separate actions for the courts to take. In Goff and Jones’ discussion in favour of incontrovertible benefit, they draw a sharp distinction between land and chattels, saving that the ‘realisable in money’ approach should apply only to the latter [xxii] . With regard to chattels, there doesn’t appear to me to be that much of a problem. If the defendant doesn’t value the chattel they have gained, then they should be happy to return it, and if not then clearly the argument of subjective devaluation will be and should be unsuccessful, with any improvements obviously compensated for with regard to market value.

We must remember, subjective devaluation and incontrovertible benefit almost always include a mistake on the plaintiff’s part. If we look at the law from this view point, surely it is them who are blameworthy (if it is to be anyone) and it is for them to owe themselves a greater duty of care in carrying out services or providing products by making sure what they are doing is in fact what is required by the particular defendant. I find it hard to accept the defendant should be held responsible and made to pay when they have acted wholly innocently.

A defendant’s argument of subjective devaluation is, on most occasions, able to be deemed inadequate by the plaintiff on the grounds of one of the many other doctrines of restitutionary relief, namely incontrovertible benefit or free acceptance. It is this, in my opinion, that interferes with the greatest fundamental value we have as human beings; personal freedom. Personal freedom is not a spent force in our law, in fact it is and should remain at the heart of our legal system (more so in criminal proceedings rightly or wrongly), and so Pollock C.B’s words “One cleans another's shoes; what can the other do but put them on?" in Taylor v Laird, and Bowen L.J’s in Falcke “liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will", still ring true today. The defendant’s right to determine personal priorities freely seems to be violated by the realisable in money dimension of the incontrovertible benefit doctrine, which imposes liability even in the absence of any normative wrongdoing, and as a result is fundamentally at odds with the underlying principles of private law. The various other cases and lines of arguments that scholars place under the rubric of incontrovertible benefit, such as ‘inevitable expense’ or ‘realisable in money’ to name but a few, are not inconsistent with the principle of subjective devaluation, but simply reflect and uphold the inherent limitations of the principle. As a result, the attractive and straightforward nature of incontrovertible benefit has left the court unable to resist temptation to favour this approach since Peel. Eventually, however, only a return to subjective devaluation with open acknowledgment and understanding of its limits will bring satisfaction to the courts and coherence to the law of restitution.