Contribution Theory

Contribution is a label used to describe the remedy that A has against B to recover some portion of the money A paid to C that C could have recovered from either of A or B, where A’s payment to C reduces the amount of B’s liability to C by some portion of the amount of A’s payment. The traditional justification for allowing A to collect from B is that A’s payment benefits B to the extent that it reduces the amount of B’s liability to C. It is usually said that this benefit to B is a necessary element of a successful contribution claim. However, in some circumstances, an event occurs after the common liability of A and B to C came into existence which has the effect of providing B, but not A, immunity to a claim by C in respect of the loss for which A and B once had the common liability. A pays C after that event occurs, at a time when B is no longer liable for any portion of the amount A pays to C. A then claims contribution from B. B’s defence will be that the contribution claim must fail because of B’s immunity to C’s claim. B asserts that A’s payment to C did not benefit B because B can not be held liable for any portion of that amount, therefore A cannot establish a prerequisite for contribution. Will A’s contribution claim succeed or fail?

The issue – call it the NBTB (No Benefit To B) issue: is B’s acquired immunity (defence) to C’s claim a defence to A’s contribution claim against B  – has been contentious in claims for contribution between tortfeasors ever since the early 20th century when legislatures in Canada (and in other countries with legal systems based on English law) began to enact legislation creating that right. (The common law didn’t allow contribution between tortfeasors.) The statutes that created the contribution right did not provide any answer, or a clear answer.

However, contribution between 2 or more persons liable to another person under a common obligation has existed for centuries in English law.  There, a clear answer to the NBTB issue has existed in English common law since the early 1890s. B’s acquired immunity to a claim by C is not a defence to A’s contribution claim, where B’s acquired immunity is the result of something done, or not done, by C. The explanation is that contribution right does not depend on the existence of a present common obligation between the A and B to C. It is enough that the common obligation existed at some period in the past.1 Historically, the NBTB problem tended to arise in cases where the  limitation period for C’s claim against B expired before A paid C. The justification was that contribution was, ultimately, an equitable remedy (even in when it manifested at law – when law and equity were separate) and, as between A and B, it was unfair that A should lose A’s rights against B because of the conduct of C; that is, C not suing B in a timely manner.

The “it’s not fair to A as between A and B” statement is more of a justification for the conclusion than the explanation for the conclusion; however, it was considered a sufficient explanation. The “it’s not fair ” statement also leaves it open to conclude that there are instances where it would be fair as between A and B that B’s acquired immunity to C provide B a defence to C’s contribution claim.

For whatever reason, the “it’s not fair” explanation and justification remains the extent of the explanation in contribution claims outside of tort. It’s also the explanation and justification that was usually adopted (in Canada, England, and Australia) by judges who had to decide whether to allow a contribution claim between tortfeasors in an NBTB situation. It’s also the explanation given unanimously (as best as I recall) by law reform commissions, reviewing the law of contribution between tortfeasors, for recommendations that, in general, B’s acquired limitation period defence to C’s claim, for example, should not be a defence to A’s contribution claims. The law reform commissions recognized that this conclusion was normative: that is, a choice was being made for social policy reasons extrinsic to the relationship between A and B.

It is accepted that the right of contribution is a right based on an unjust enrichment. In unjust enrichment terms, contribution is available to A from B when it is unjust that B retain the benefit B received when A paid C. That benefit is, normally, the discharge of at least some portion of B’s obligation to C. Put this way, you should, once again, see the problem created by the NBTB issue. B’s defence seems to be a matter of principle: there is no benefit to B if A’s payment to C is made when B can no longer be held liable to C. If this argument is correct, then it seems that allowing A contribution from B may be justified on normative (social policy) reasons but it is an exception to principle.

Unjust Enrichment doctrine (as it has developed in Canadian and English law starting in the last quarter of the 20th century) now permits a more principled explanation of why contribution in all areas of obligation may, but need not be, allowed in the NBTB situation so that as a matter of principle. The reason why is set out below.

Under Unjust Enrichment or equivalent principles, it is the reason for B’s acquired immunity to C which governs. It is not the mere fact of B’s immunity. If this premise is rejected, the reasons are normative: social policy reasons extrinsic to law.

For the purposes of a contribution claim by A against B:

(1)        A’s loss and B’s gain need not be linked together, initially, by some positive act performed by A, for example, payment by A to C. The loss and gain, upon which A’s contribution claim is based, may also be linked by an act or omission by C, for example, failure by C to sue B within a relevant limitation period or settlement by C with B for less than B’s share of C’s loss.

(2)        A’s loss for the purpose of contribution, which instantiates when A makes the payment to C upon which A’s claim for contribution against B is based, need not have chronologically preceded B’s gain before it can be said that A’s loss and B’s gain are relevantly linked together.

(3)        The normative considerations that inform the second and third elements of a cause of action in Unjust Enrichment, or a cause of action governed by equivalent principles, do not entail the conclusion the mere fact that B has ceased to be liable to C is a sufficient defence to A’s contribution claim. What matters is the reason for B’s immunity to C.

(4)        If these propositions are accepted, then it follows that a claim in or based on unjust enrichment may lie against B for contribution even if B has ceased to be liable to C at the time when A pays C.

The propositions at (1) and (2) in this solution satisfy the factual components of the first and second elements of the test for a claim in Unjust Enrichment. The social policy considerations implicit in the second element and explicit in the third element of the test are covered in the proposition at (3). Together, propositions at (1), (2) and (3) form the framework for the analysis which will provide the answer, in principle, to the NBTB problem, assuming the answer for the particular case is not provided by statute.

The analysis permits either a “yes” or “no” answer, depending on the facts of the particular case while being agnostic to the correct answer. For Canadian law, it is the answer to the question: “Is there an absence of juristic reason for B’s enrichment?” where the mere fact of B’s immunity to C does not require the court to find that the immunity is a sufficient reason for B’s gain. Everything else is details.

I have written an article providing a more complete explanation. It will be available, soon through SSRN. 2

 

 

 


  1. The why of the “D’oh”: it is wryly funny that I knew this when I was writing Apportionment of Fault in Tort in the late 1970s, specifically mentioned it in that text, and then managed to forget that I had done so until very recently. 
  2. Only about 10,500 words including footnotes; maybe 6,000 without case names and citations. 
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s