The subsidiarity rule: the unjust enrichment doctrine in construction law

• Author: Aimite Jorge
• Position: Law School, University of Western Cape, Cape Town, South Africa

1 Introduction

By placing special emphasis on claims arising from subcontracting scenarios in the built environment, this article re-examines the subsidiarity rule in the law of unjustified enrichment¹. In essence, the subsidiarity rule precludes a free choice of actions between enrichment and contractual or other legally recognized claims. The rationale for such a rule is, inter alia, to prevent subverting the legal order, to safeguard the paritas creditorum rule in cases of intervening insolvency, and to direct the plaintiff to the proper claim. Avoiding concurrence between enrichment and contractual actions in such scenarios strengthens the legal system by preventing plaintiffs who concluded bad bargains from circumventing their cum causa claim and pursuing a more rewarding claim. This situation, would be analogous to “a plaintiff ‘A’ having someone's cake and eating it by enjoying both a contractual claim against ‘B’ (their contractual partner) and an enrichment claim against the third party C” ( Du Plessis, 2012, p. 302 ). This paper argues that the direct and unqualified application of the subsidiarity rule (if a legal system officially sanctions it), or its indirect application (where the rule is not officially recognized but nevertheless applied), often leads to incongruent results.

The article examines the issue from the perspectives of South African and Brazilian law². Brief references are made to the Franco-Italian treatment of the problem in terms of pioneering the concept of subsidiarity in its most reported forms, as well as to relevant law in Canada and Portugal. An overview of the common-law treatment of the rule is also provided, and there is, therefore, consideration of the Anglo-American approach. The analysis looks at the issue regardless of whether the respective legal systems expressly provide for a subsidiarity rule or not.

The re-examination of the rule starts with a conceptual analysis of subsidiarity in general. It proceeds with a practical assessment of the rule in specific jurisdictions, namely South African, Brazilian, and common-law jurisdictions (the latter collectively termed the Anglo-American approach). The study culminates by re-assessing the working or otherwise of the rule by using the example of the South African case Palabora Mining Co v. Coetzer³. An underlying idea that permeates the discussion is the question as to whether the recognition of a general principle against unjustified enrichment, or aspiring to that aim ( Witty and Visser, 2004, pp. 366-398 ) in a legal system impacts on the operation of this rule. If it does, the question is asked as to whether the rule has any effect on the change-of-position defence.

2 Conceptual analysis

2. 1 What is generally understood by subsidiarity

In its simplest form, “subsidiarity” in legal discourse means that two principles or doctrines exist in a primary-secondary relationship. It may also mean that one principle or doctrine is constrained in the presence of the other⁴; or simply that there ought to be no concurrence between two subject matters, because the existence of one renders the other unnecessary or undesirable⁵. However, the precise connotation given to the notion is dependent on the legal system that uses it. It also depends on the specific circumstances in which the term is used, and how it came to be used in that legal system. Inasmuch as legal systems formulate their legal doctrines and principles differently, so their understanding of subsidiarity will vary. Therefore, it cannot be assumed that the concept of subsidiarity means the same thing in all legal systems, or even that its use in a particular legal system is necessarily an unequivocal one.

Some commentators see in subsidiarity the expression of the ordering of the private law itself. They argue that it reflects the values and commitments of a liberal society. The drive of a liberal tradition, which accords primacy and the maximization of individual autonomy to citizens, requires subsidiarity of one “branch” of the private law, such as unjustified enrichment, to serve protective interests. It empowers private parties to facilitate their private decisions ( Epstein, 1994, p. 1369 ; Grantham and Rickett, 2001, pp. 273, 293 ). Others simply state that subsidiarity is a technique of limiting the applicability of the general enrichment remedy. As such, its exact meaning is a matter of legal policy ( Schrage, 1999, pp. 57, 78 ). Within this second reasoning falls another approach, advocated by Visser (2006, pp. 767, 771-773) . He says that the whole debate around subsidiarity in a particular legal system is nothing more than a discussion about the role ascribed to unjustified enrichment doctrine. However, Visser cautions that subsidiarity may not be the best way to delineate the scope of enrichment liability which the predominant trend in the world indicates.

At times, legal literature describes subsidiarity in two different modalities: “weak subsidiarity” and “strong subsidiary” ( Smith, 2002, pp. 596 )⁶. Weak subsidiarity directs the claimant to the correct claim. Strong subsidiarity usually denies the plaintiff any claim. Deeper analysis reveals, however, that weak subsidiarity is nothing more than the relationship between two different claims. Strong subsidiarity, on the other hand, is a relationship between legal dispositions or a set of rules. On this analysis, subsidiarity, at its weakest point, denotes the subordination of one claim where another claim in fact offers the plaintiff a basis of recovery. At its strongest point, subsidiarity denies the availability of a claim because another claim is, in principle, available, even though the facts show that it does not avail the plaintiff ( Grantham and Rickett, 2001, p. 273 ). In some jurisdictions, these two modalities are described as “concrete subsidiarity” and “abstract subsidiarity”⁷. “Concrete subsidiarity” is the situation in which one action (ordinarily an enrichment action) is excluded only when, depending on the circumstances of the particular plaintiff, the other action will in fact enable him to make good his loss. “Abstract subsidiarity” denotes the situation in which the enrichment is excluded whenever, in principle, the other action is available, or could have been available even if in the particular case the plaintiff would derive no benefit from it ( Nicholas, 1994 ; Beatson and Schrage, 2003, p. 428 ).

Visser (2006, pp. 767, 771-773) adds a modified analysis of the types of subsidiarity just described. He argues that subsidiarity can be analysed through a tripartite enquiry. Ultimately, this enquiry centres on the problem of whether a particular jurisdiction has or has not recognised a general enrichment action. If it has recognised one, the question then becomes how it views or classifies it, and how concurrence of actions is perceived. In Visser's own words the threefold enquiry is as follows.

[Subsidiarity] is a complex notion and it could encompass several different questions, namely:

whether a claim based on a general principle against unjustified enrichment should be subsidiary to specific existing actions (in systems where a general action is introduced alongside existing remedies);

whether, in the case of concurrence of actions, an enrichment claim must be seen as a last resort, or one which may be chosen as an alternative to, say, a contractual claim (provided of course the elements of both types have been shown to be present); and lastly

to what extent, if the nature of the concurrence takes the form of the claimant having a claim in contract against his contractual partner and a claim in enrichment against a third party, the claimant should be allowed to chose whom to sue.

The first question is only relevant in jurisdictions where a general enrichment action is already recognised. The second is relevant to jurisdictions that contemplate introducing a general enrichment action. For these last jurisdictions, Visser suggests that the safest route is to recognise a general enrichment action which is subsidiary to the currently existing actions⁸ because the unitary approach may not necessarily work⁹. The second question also underlines the debate around what role a particular legal system wants to give to the doctrine of unjustified enrichment. The third question is mostly relevant to views on the concurrence of actions between the different branches of private law or where actions are allowed to be pleaded in the alternative, especially where the case envisages third parties. Visser (2006, p. 772) , therefore, concludes that:

[…] if in a particular system the rule is that, once a claimant has exhausted the possibility of getting satisfaction from his contractual partner, he may institute an enrichment action against a third party on the basis of unjustified enrichment, one has a situation of true subsidiarity. If however, a jurisdiction allows only one of the actions, that action is not subsidiary to the other possible action, but alternative. This is the province of multiparty enrichment.

From this, it is clear that a precise understanding of the concept of “subsidiarity” can only be achieved if it is analysed in the context in which it is used.

2. 2 The operation of the subsidiarity rule in specific jurisdictions

2.2. 1 The South African approach to the subsidiarity rule

The notion of subsidiarity is virtually unknown in South African enrichment law¹⁰. As the law currently stands, the...