Restitution

Citation(2005) 6 SAL Ann Rev 443
AuthorYEO TIONG MIN LLB (Hons) (National University of Singapore), BCL, DPhil (Oxford); Advocate and Solicitor (Singapore); Associate Professor, Faculty of Law, National University of Singapore.
Date01 December 2005
Published date01 December 2005
Introduction

19.1 In the year under review, there have been a number of very important observations by the Singapore Court of Appeal especially on the equitable side of the law of restitution. Highlights include the acceptance of the power to order an account of profits for breach of contract in exceptional circumstances; the suggestion that the account of profits remedy could be more widely available, beyond breaches of contract, in equity”s auxiliary jurisdiction coming in aid of common law and statutory rights; and the use of equitable subrogation as a tool to reverse unjust enrichment in appropriate cases.

Restitution for wrongs
Account of profits for breach of contract

19.2 In the important but controversial case of Attorney General v Blake[2001] 1 AC 268 (‘AG v Blake’), the House of Lords departed from the entrenched principle in contract law that the plaintiff is only entitled to compensation for his losses arising from a breach of contract. Although the decision has received a cool reception in Australia, principally because of a difference of view on the objectives of contract law (see Hospitality Group Pty Ltd v Australian Rugby Union Ltd(2001) 110 FCR 157 at [155]—[159]; Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd(2001) 191 ALR 402; Biscayne Partners Pty Ltd v Valance Corp Pty Ltd[2003] NSWSC 874 at [228]—[237]), it has been very influential in Singapore law.

19.3 The first time the principle of restitution for breach of contract was considered by the Singapore Court of Appeal was in Friis v Casetech Trading Pte Ltd[2000] 3 SLR 590, before the House of Lords delivered its decision in AG v Blake, where the court only had the benefit of the English Court of Appeal decision in Attorney General v Blake[1998] Ch 439. In Friis v Casetech Trading Pte Ltd, the Singapore Court of Appeal, in obiter (the court did not consider that the restitutionary remedy was warranted on the facts), cited (at [39]) with approval the observations of Lord Woolf MR in the English Court

of Appeal (at 458) on the availability of restitutionary awards for breach of contract in two situations: when the defendant fails to provide the full extent of the services he had contracted to provide and for which he has charged the plaintiff; and where the defendant has obtained his profit by doing the very thing which he had contracted not to do. This must now be read in the light of the House of Lords decision and a subsequent Court of Appeal decision in Singapore.

19.4 The House of Lords in AG v Blake (supra para 19.2), while affirming the availability of restitutionary awards for breach of contract, confined its decision to the account of profits in exceptional circumstances, and rejected the two guidelines in the Court of Appeal (supra para 19.3) as unreliable guides to the existence of the requisite exceptional circumstances. In Teh Guek Ngor Engelin née Tan v Chia Ee Lin Evelyn[2005] 3 SLR 22, the Singapore Court Appeal, affirming the High Court decision of Chia Ee Lin Evelyn v Teh Guek Ngor Engelin née Tan[2004] 4 SLR 330, restated Singapore law to be in accordance with the House of Lords decision in AG v Blake. The case arose from an alleged wrongful termination of a consultancy contract. The respondent alleged that the appellant had wrongfully terminated the consultancy agreement and had failed to pay the respondent the share of profits to which she was entitled under the agreement. The trial judge found in the respondent”s favour. On appeal, the Court of Appeal affirmed the findings of the trial judge, challenged by the appellants, that there was no agreement of compromise between the parties after the alleged termination, that the consultancy agreement had not been terminated by mutual consent, and that there was no oral agreement that the respondent was to refund to the appellant a share of the profits to which the respondent had been entitled under the consultancy agreement.

19.5 The point of interest for this chapter arose from the appeal on the point of damages. Although the Court of Appeal held that the trial judge had been correct in his application of the principles of law to the quantification of the damages for the breach of contract (and therefore dismissed the appeal on all grounds), it made important obiter observations on an alternative remedy sought by the respondent. Although the respondent had claimed damages for wrongful termination of the consultancy agreement, she had, in the alternative, sought an order for an account of all sums due to her from the appellant. The Court of Appeal took this to be effectively a request for the equitable remedy for an account of profits. The court took the opportunity to state the law of Singapore on the availability of this remedy for breach of contract.

19.6 The Court of Appeal emphasised that the normal remedy for breach of contract remains compensatory (at [17]). However, taking the lead from the judgment of Lord Nicholls of Birkenhead in AG v Blake, the court accepted that the remedy of account of profits would be available only in exceptional circumstances. The following passage from Lord Nicholls” speech (at 285) was emphasised by the Court of Appeal and bears repeating:

No fixed rules can be prescribed. The court will have regard to all the circumstances, including the subject matter of the contract, the purpose of the contractual provision which has been breached, the circumstances in which the breach occurred, the consequences of the breach and the circumstances in which relief is being sought. A useful general guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant”s profit-making activity and, hence, in depriving him of his profit.

19.7 Significantly, the court also endorsed Lord Nicholls” statement (ibid) that neither of the two suggested guidelines from Lord Woolf MR in the English Court of Appeal (supra para 19.3) would, by themselves, constitute good reasons for ordering an account of profits. The Singapore Court of Appeal made it clear (at [18]) that the remedy of an account of profits would not be available for cases of wrongful termination generally. The court noted (ibid) the unusual relationship between the parties: although it was based on a consultancy contract, the respondent had additional duties and was entitled to a share of the profits, yet this was not enough to amount to exceptional circumstances for an account of profits.

19.8 This clarification of the applicability of the principle in AG v Blake for Singapore is welcome, even if its application in England has caused difficulty. The English courts are just beginning to grapple with the cases coming before them, and no firmer guideline on the scope of the principle than what has been stated above has so far emerged. The relationship between the (equitable) account of the entire profits awarded in AG v Blake itself and (common law) restitutionary damages of a percentage of the profits made from the breach of the contract (an alternative justification of the award in Experience Hendrix LLC v PPX Enterprises Inc[2003] FSR 46 (‘Hendrix’), especially at [26], [34]—[35]) by analogy with the statutory jurisdiction to award damages in lieu of an injunction (Supreme Court of Judicature Act (Cap 322, 1999 Rev Ed), s 18(2), First Schedule, para 14; and Wrotham Park Estate Co v Parkside Homes Ltd[1974] 1 WLR 798 (‘Wrotham Park’)) remains to be worked out. In AG v Blake, Lord Nicholls (with whom Lord Goff of Chieveley and Lord Browne-Wilkinson agreed) considered the Wrotham Park line of authorities as a crucial step in the analysis leading to

the restitutionary account of profits remedy (at 283—284), Lord Steyn put it to one side (at 291), and Lord Hobhouse of Woodborough (dissenting) saw it as clearly compensatory (at 298). Hendrix itself (at [34]) suggests that the common law remedy has been freed from the fetters of the statutory jurisdiction (which depends on the actual availability of injunctive remedies). While the common law remedy would be available as of right, it may be confined to cases protecting recognised property interests; otherwise it would become a normal remedy for every breach of contract (see para 19.6 above), since every breach of contract involves the deprivation by the party in breach of something valuable from the innocent party, be it the (user) value of the right in question or the opportunity to bargain for release from the contractual obligation. There are other difficulties: the relationship between the common law, equitable, and statutory remedies that provide restitution for breach of contract; the appropriate quantum of the award; the scope of what amounts to exceptional circumstances that merit a restitutionary remedy; and, at least in other jurisdictions which have expanded their law on exemplary damages, the relationship between this restitutionary remedy and exemplary damages for breach of contract (see eg, Bank of America Canada v Clarica Trust Company[2002] 2 SCR 601; in Singapore law, see CHS CPO GmbH v Vikas Goel[2005] 3 SLR 202 at [66]—[67]). These are legal issues that await further clarification from the courts in the Commonwealth.

19.9 Moreover, this clarification of the scope of AG v Blake for Singapore law is welcome, even if on the facts this may not even have been a case where a restitutionary remedy was being sought. An account of profits is a remedy with many faces. It appears from the High Court decision in Chia Ee Lin Evelyn v Teh Guek Ngor Engelin née Tan (supra para 19.4, at [2]) that the respondent”s ‘claim is for an account of all sums due to her under the relevant written consultancy agreement and payment to her of all sums found due’. This appears to be nothing more than asking for the performance of the contract; the remedy of account sought is used as a means to enforce a primary contractual right to the payment of a share of the profits. In so far...

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