#6856 - Boscawen V. Bajwa - Restitution of Unjust Enrichment BCL

Boscawen v. Bajwa

Facts

Contract for sale of Mr. Bajwa’s property: On 3 August 1990 Mr. Bajwa exchanged contracts for the sale of the property for the sum of 165,000. It is common ground before us that the documents did not conform to the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, with the result that neither party became contractually bound. Neither of them realised this. After allowing for the payment of the deposit and an agreed reduction in the purchase price the balance payable on completion was 140,000.

The purchasers had previously obtained an offer of a mortgage advance from the Abbey National of 140,000 which was to be secured by a first legal charge on the property. On 9 August 1990, at the request of the purchasers' solicitors, B. Dave & Co. (“Dave”), the Abbey National sent 140,000 by telegraphic transfer to Dave's client account. As is common, Dave were acting as solicitors both for the purchasers and for the Abbey National. They received the money on terms which obliged them to use the money for the completion of the purchase and to return the money if for any reason completion did not take place.

Halifax, the previous holder of a charge on Mr. Bajwa’s payment demanded payment: Meanwhile the Halifax was pressing for payment. It had some time previously obtained a suspended order for possession of the property for non-payment of the mortgage instalments but had agreed not to enforce it pending completion of a sale by Mr. Bajwa. On 15 August the Halifax's solicitors had written to Hill Lawson stating that the amount required to redeem the mortgage on 17 August was 141,222.40.

Mr. Bajwa paid off Halifax’s charge from Abbey National’s payment: After some months of argument the balance required to discharge the Halifax's legal charge was agreed at 1,342.41. Mr. Bajwa paid this direct to the Halifax on 29 April 1991 and shortly afterwards the Halifax forwarded the title deeds to Hill Lawson together with a completed discharge in Land Registry Form 53.

It has not been suggested that Mr. Bajwa, who throughout relied on his solicitors, was guilty of any impropriety or want of probity. Nor is it suggested that either firm of solicitors acted dishonestly or in bad faith. It may be doubted whether Hill Lawson did anything more reprehensible than act precipitately in anticipation of the clearance of Dave's cheque and the receipt of further funds from Mr. Bajwa to complete the redemption of the Halifax's charge. It is, however, beyond dispute that, as a result of their actions, money belonging to the Abbey National which was held by Dave in their client account as trust money for and on behalf of the Abbey National, and later by Hill Lawson in their client account as trust money to Dave's order, pending completion of the sale of the property, was applied in breach of trust in the partial discharge of the Halifax's legal charge without obtaining the completion of the sale and the execution of a new mortgage in favour of the Abbey National.

Holding

Not incorrect to combine tracing and subrogation

The submission that the deputy judge illegitimately conflated two different causes of action, the equitable tracing claim and the claim to a right of subrogation, betrays a confusion of thought which arises from the admittedly misleading terminology which is traditionally used in the context of equitable claims for restitution. Equity lawyers habitually use the expressions “the tracing claim” and “the tracing remedy” to describe the proprietary claim and the proprietary remedy which equity makes available to the beneficial owner who seeks to recover his property in specie from those into whose hands it has come. Tracing properly so-called, however, is neither a claim nor a remedy but a process. Moreover, it is not confined to the case where the plaintiff seeks a proprietary remedy; it is equally necessary where he seeks a personal remedy against the knowing recipient or knowing assistant. It is the process by which the plaintiff traces what has happened to his property, identifies the persons who have handled or received it, and justifies his claim that the money which they handled or received (and, if necessary, which they still retain) can properly be regarded as representing his property.

If the plaintiff succeeds in tracing his property, whether in its original or in some changed form, into the hands of the defendant, and overcomes any defences which are put forward on the defendant's behalf, he is entitled to a remedy. The remedy will be fashioned to the circumstances. The plaintiff will generally be entitled to a personal remedy; if he seeks a proprietary remedy he must usually prove that the property to which he lays claim is still in the ownership of the defendant. If he succeeds in doing this the court will treat the defendant as holding the property on a constructive trust for the plaintiff and will order the defendant to transfer it in specie to the plaintiff. But this is only one of the proprietary remedies which are available to a court of equity… And if the plaintiff's money has been used to discharge a mortgage on the defendant's land, then the court may achieve a similar result by treating the land as subject to a charge by way of subrogation in favour of the plaintiff…. Subrogation, therefore, is a remedy, not a cause of action.

Accordingly, there was nothing illegitimate in the deputy judge's invocation of the two doctrines of tracing and subrogation in the same case. They arose at different stages of the proceedings. Tracing was the process by which the Abbey National sought to establish that its money was applied in the discharge of the Halifax's charge; subrogation was the remedy which it sought in order to deprive Mr. Bajwa (through whom the appellants claim) of the unjust enrichment which he would thereby otherwise obtain at the Abbey National's expense.

Requisite elements for establishing subrogation

From this the appellants derive the proposition that in order to be subrogated to the creditor's security the...