I. Landesgericht Bonn

II. Oberlandesgericht Köln

The claimant demands from the defendant on the basis of a transferred right the remainder of his payment for work in the sum of 20,505 DM and interest. The claimant's husband, the witness S, carried out skilled trade work for the defendant in 1985 and 1986 without being entered in the Skilled Trade Register and without having registered a business. Both these things were known to the defendant. He has paid at least 4500 DM to S for his services. S has not paid taxes and social insurance contributions. S has transferred to the claimant the remainder of the demands for payment for work asserted by him.

The Landgericht has ordered the defendant to pay to the claimant 11,880 DM and interest. In other respects it has rejected the claim. The Oberlandesgericht has rejected the claim entirely. The claimant's appeal in law, which has been admitted, led to quashing of the appeal court judgment and reference of the matter back to the Oberlandesgericht.

Reasons:

1.The appeal court accepts that not only the defendant, but also his contracting partner S, had violated the Act to Combat Illegal Labour (SchwArbG). S had carried out a skilled trade independently without being entered in the Skilled Trade Register (§ 1 para 1 no 3 of the Act to Combat Illegal Labour). He had at the same time acted in order to obtain economic advantages of a substantial extent. These endeavours sufficed for fulfilment of the definition. He therefore had neither contractual nor statutory claims which he could have transferred to the claimant.

2. That is correct as a starting point.

...

3. The contracts concluded by S and the defendant were therefore void according to § 134 of the BGB. As the Senate (reference omitted) has explained in more detail, the Act to Combat Illegal Labour is intended simply to forbid illegal labour by the threat of financial penalties against the contractor as well as against the client and to prevent the exchange of performances between the "contractual partners". This in itself is an important indication that the legal order intends to deny effectiveness to a contract which disregards the prohibition of illegal labour. In particular - as the senate has explained in detail (reference omitted) - the purpose of the Act to Combat Illegal Labour can only be attained if contracts of this kind are regarded as not legally effective. That applies at least when, as here, both parties have violated the Act to Combat Illegal Labour. In the individual case, though, the "appeal to invalidity" in respect of a legal transaction which violates a statutory provision can violate good faith, so that the contract must be treated in the end result as effective (reference omitted).

4. The claimant can therefore, because of the invalidity of the concluded contracts, derive rights if need be from the dismantling of them. According to the case law of the senate, §§ 677 ff of the BGB are in principle applicable in cases of this kind (reference omitted). But the "expenditure" of S consisted here of an activity which was prohibited by statute. He could not "consider this to be necessary according to the circumstances"; simply for this reason a claim to reimbursement in accordance with §§ 683, 670 of the BGB does not apply.

5. But the claimant can, contrary to the view of the appeal court, successfully refer to the provisions on unjustified enrichment. The assumption of a claim under § 812 para 1 sentence 1 1st alternative of the BGB does not fail here in the end result because of the provision in § 817 sentence 2 of the BGB. This provision applies in principle for case formulations of the kind present here. It can also be used against the creditor's successor (reference omitted).

In the present case, the assignor S has violated the Act to Combat Illegal Labour by his skilled trade activity. According to the findings of the appeal court, both parties intended to implement their contracts as illegal labour. There can therefore be no doubt that S was aware of the violation and intended it all the same.

6. Enrichment claims belong however to fairness law and are therefore subject to a special degree to the principles of good faith (reference omitted). It would not be reconcilable with these principles if the defendant did not have to restore the value of what he had unlawfully received, but could keep it without paying for it. The Reichsgericht, in the case of prior performance in respect of the purchase of a brothel, has described the purchaser's intention not to pay but to refuse to hand over the house which he had acquired by referring to § 817 sentence 2 of the BGB as deceitful conduct not protected by the legal order (reference omitted). The position is similar here. When applying the prohibition in § 817 sentence 2 of the BGB (reference omitted) on demanding back, which affects the creditor harshly, it is not possible to leave out of account the purpose pursued by the prohibiting statute in question (reference omitted). Accordingly a restrictive interpretation of the provision (which is problematic from the point of view of legal policy and disputed in the area of its application) can be required in the individual case. The Act to Combat Illegal Labour does not primarily pursue the protection of either one or both contracting partners, but principally the safeguarding of public interests. In particular labour market policy considerations were in the foreground when the Act was enacted.

According to the official reasons, illegal labour leads to increased unemployment in many branches of the vocational world, causes tax losses and harms the social insurance fund; it also endangers the independent business proprietor, who cannot work so cheaply as the illegal worker. The client should only secondarily be protected from having no guarantee claims in respect of defective work peformance (reference omitted). The Act was formulated as a protective statute in the sense of § 134 of the BGB because the goals pursued could only be attained by the invalidity of the forbidden transactions (reference omitted). But on the other hand, by excluding contractual claims, the objective of the Act, which is principally the policy of preserving order, is largely complied with. It is not irrefutably required, for the implementation of the aims of the Act, for the customer in a case of illegal labour to be allowed to keep the performance without payment, at the cost of the illegal worker who performs first. This is because the exclusion of contractual claims (combined with the risk of a criminal prosecution and the subsequent payment of taxes and social welfare contributions when the illegal labour becomes known) is sufficient on its own to provide the general preventative effect desired by the legislature. The guarantee of a settlement in enrichment law - especially in the limited scope required (see further below on this) - is in the view of the senate not inconsistent with this general preventative effect. According to the view of the legislature, the client, who is generally stronger economically, should moreover on no account be treated more favourably than the economically weaker illegal worker (reference omitted). Under these circumstances a view based on good faith acquires decisive importance ie that it would not correspond with fairness to leave unpaid for an unjustified advantage to the customer who has benefited from the prior performance (references omitted). According to § 818 para 2 of the BGB the enrichment claim provides compensation for the value which has accrued to the defendant without legal ground. When valuing what has been obtained by the illegal labour, it is necessary first to bear in mind that the illegal worker can on no account receive any more by way of an enrichment settlement than he had agreed - in an invalid way - as payment with his client (reference omitted). However as a rule quite susbstantial reductions from this will be appropriate because of the risks associated with illegal labour. A particular consideration which strongly reduces the value of the claim is that contractual guarantee claims are not present from the outset because of the invalidity of the contract. If defects have already shown themselves, these are additionally to be included into the calculation of the settlement within the framework of the balancing exercise.

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