Restitution & Wrongdoing
Breach of Contract
A person might deliberately breach a contract, in circumstances where the damage to the other party is less than what he gains so that he profits from his breach. He might be said to benefit from his wrong.
However, it is argued that such breaches are economically rational, justifiable and should be encouraged. This is on the basis that it is in the interests of the efficiency that the other party be compensated, where the alternative is more profitable, even after the payment of compensation.
There are, of course, limitations to these principles. In some cases, a party will be under a duty which cannot be renounced by payment of compensation. An injunction may be available to enforce the contract. In other cases, the courts will regard a deliberate breach of contract for profit as odious and will award punitive damages.
Exemplary Damages
Exemplary damages are allowed in broader circumstances in Ireland. Exemplary damages may be granted in the case of deliberate torts such as false imprisonment, malicious prosecution, trespass, assault and deliberate defamation. Where a civil wrong has been deliberately committed in order to profit so that compensatory damages would leave the person benefitting from his wrongdoing, additional exemplary damages, may be awarded.
There are instances in tort, where the financial loss / damage suffered may be minimal, for example where the respondent misuses the claimant’s land. In such case, the court may make an award based on the level of rent or licence fee that would have applied, had the matter been negotiated.
Restitution in respect of Civil Wrongs
Where there is a breach of duty or civil wrong, there will usually be a remedy by way of damages in tort. However, in many instances, there may be a gain to the respondent or other circumstances which justify disgorgement of assets received, for which there is no corresponding loss, for which an award of damages may be made
It is a broad principle of law that a person should not benefit from his wrongdoing. There is no general right of restitution for wrongs whether criminal, civil, deliberate or negligent. There are statutory provisions in the criminal code providing for restitution of criminal assets. This has been broadened from stolen property and other assets involved directly in crime to more general proceeds of crime legislation.
Waiver of Claim
The principle of waiver of tort with an alternative remedy for monies had and received appears to be available generally in relation to the misuse of another’s property rights. In the case of the misuse of goods, a may claimant waive his right to claim for detinue in tort and seek payments for the value of the goods wrongfully used
However, there is no general right to waive a claim in tort for a claim in restitution. It is likely to be limited in a similar way to exemplary damages and tracing, outside of proprietary type claims. Otherwise, it would cut across the general principle that common law damages are remiarily compensatory in nature.
Similarly, in a case of mortgage fraud based on fraudulent representations, the lender sought to keep the full proceeds of sale on enforcement of the mortgage where there was a surplus. It was not permitted to do so.
Proprietary Rights
Property rights may endure after an act or transaction which is tortious in nature. If goods are given to a person on loan who wrongfully sells them the title to the asset does not pass and may be reclaimed in an action for conversion. Furthermore, assets purchased in substitution are may be traced.
In the case of trustees or fiduciaries, the scope of the proprietary right is wider and attaches to a wider class of substituted assets, as well as assets acquired as a result of a conflict of trust.
The circumstances in which proprietary remedy or constructive trust allowed are relatively narrow. In other common law jurisdictions, the constructive trust has been given a wider function as a means of doing justice. Its significance is that it holds against insolvency by creating a security.
Where there is a constructive trust, there is a wider recourse. There is an account of profits, provided that the beneficiaries of the trust or fiduciary duties may not recover both for loss and for on account of profit.
Overusing Assets
In the case of leased property, a person who overholds is obliged to pay mesne rates in respect of his occupation, after the expiry of the lease and in the absence of a new tenancy.
In cases of trespass that a claim may include a reasonable charge for use of lands but not it appears windfall gains. Similarly, mesne rates is payable by a person in wrongful occupation of land, notwithstanding that it might not otherwise have een let.
The principle of mesne rates has been applied outside of land law. Where goods are left at a garage for longer than contract period, was allowed on the same basis as a trespass notwithstanding that there was no trespass. There are cases either way, although in principle, restitutionary compensation for the hypothetical licence fee seems to be favoured on balance.
Intellectual Property
Restitution is provided by statute in the case of infringement of intellectual property rights. Person who infringes copyright, trademarks and patents is obliged not only to pay damages, but may be required to account for profits. The same principle applies in respect of rights of know-how and proprietary commercial information, which are protected by common law and equitable principles.
In cases of statutory intellectual property rights, the right is provided for in the relevant statutes. In other cases, it may be available under equitable principles.
Where an ex-employee takes advantage of confidential information of a quasi-proprietary nature, a restitutionary remedy is likely to be available in respect of breach of fiduciary duty. Where a former intelligence officer wrote a book, disclosing details of his work with the Security Services, an account of profits was sought by the State as his former employer.
Although the State was awarded damages for breach of contract, it was prepared in principle to award restitutionary damages as well on the basis that the disclosures were analogous to a breach of confidence.
Intangible Assets and Rights
Where a person breaches a contract, or covenant the normal remedy for breach is damages for financial loss incurred. In some cases, an injunction may be available in some cases. This is determined generally by the principles applicable respectively to pre-trial and permanent injunctions.
The issue arises in relation to a breach of restrictive covenants affecting land. The breach of a covenant, restricting the number of properties may lead to very little measurable financial damage. Where a breach of the restrictive covenant was not restrained by injunction (e.g. the works were already done) damages may be based on the hypothetical licence fee.
The principle applies to proprietary type rights which are capable of licensing or being rented. In the case of misuse of statutory intellectual property rights, the damages awarded are often assessed with reference to what a reasonable licence fee might have been in the circumstances.
In some instances, either based on statute or in equity, a person may ay waive his rights to damages in tort and instead seek an account of profits or recoupment / disgorgement of benefits received by the defendant. This claim is in the nature of a claim for monies had and received.
Trustees and Fiducuaries
Breaches of trustee and fiduciary duties may be the subject of equitable remedies, that are not otherwise available. The courts of equity uphold the principle that the person should not benefit from wrongdoing in connection with the office of trustee or other fiduciary positions. The remedy of a constructive trust may be granted in respect of any benefit obtained in breach of trust. This is so, regardless of whether the trust could itself have taken advantage of transaction or arrangement concerned.
Where the court disapproves of the respondent’s actions, exemplary damages may be awarded. Some courts limit exemplary damages to deliberate, high-handed action, in particular by public authorities and to deliberate wrongdoing, from which the respondent seek to profit.
Trusts and Fiduciary Duties
In the case of breach of trust and fiduciary dutes, the duty to account for profits wrongfully made is well established. Fiduciary duties apply to directors, partners, agents.
It is a fundamental duty of a trustee not to make a profit from his dealings with the trust. He must avoid conflicts of interest. He is precluded from taking advantage of opportunities, even if the trust does not have the capacity to take them. . The principle applies to directors and others in a fiduciary relationship / position.
The strict rules in the case of trust evolved so as to prevent the possibility of conflicts of interest and enrichment from the use of trust assets or opportunities. An account of profits was originally an equitable remedy in respect of property wrongly received. It has been extended by statute to copyright and patents. It subsists at common law in respect of breach of confidence and passing off.