#6740 - Charles Uren V. First National Home Finance Ltd. - Restitution of Unjust Enrichment BCL

Charles Uren v. First National Home Finance Ltd.

Facts

Mr Uren is one of many intending purchasers in a development of flats in Tenerife known as Santa Barbara. The development was being carried out at the end of the 1980s and into the 1990s. It was carried out by a company called Arrish Limited, a Manx company. Mr Uren agreed to acquire two flats, and he paid 50,000 (in various instalments) to Arrish as part payment of the purchase price. A company in the same group as the defendant lent monies to Arrish for the purposes of the development, and there were many other purchasers. In July 1990, Arrish limited went insolvent and the lending bank appointed receivers. By way of enforcement of the security, there was a Spanish judicial auction - At the auction the development property was purchased by another Manx company called Pitchcott Limited (“Pitchcott”), a company owned and controlled by the First National group of which the defendant is part.

The intending purchasers formed an action group, and contributed various sums to that group. Mr Uren himself contributed 75,000 being the amount of the balance of the purchase price due on his flat. Over 1.5m was raised. The purpose of the action group was to procure that the development got finished. The defendant is alleged to have encouraged the purchasers' association in this endeavour and to have indicated that it would make funding available to enable the purchasers to complete the development. In 1992 this action group came to an arrangement with the First National Group, using its fighting fund of 1.54m. This money (or rather the bulk of it) was made available to a new company (incorporated in England) known as Santa Barbara Limited, which was intended to be a vehicle for completing the development.

There was another judicial auction, and again the property was bought by a company controlled by (in essence being part of) the First National Group, namely Agosta 96. The purchase price was, apparently, rather less than the sums due and outstanding to the defendant bank… there was apparently a deal with another company, experienced in timeshare operations, known as LSI. That deal (it is assumed for present purposes) had two elements. The first was a sale at 7m. That would be enough to repay the outstanding indebtedness. The second is said to arise on a collateral contract (not apparently documented, but which I am invited to assume for present purposes to exist) to the effect that LSI would introduce business to the defendant worth about 1m a year for the following 3 to 5 years.

Paragraph 20 alleges that the claimant (along with the other purchasers) had lost his apartments and all the money that he had already paid, whereas the defendant bank not only had recovered what was owing by Santa Barbara Limited/Pitchcott through the sale of the development site to LSI (through Agosta 96), but was also going to derive the other substantial profits referred to… the complaint further alleges that when the sale of the development by the defendant to LSI in 1998 was complete, the claimant's entire investment was lost… the enrichment of the defendant, in the form of profits from business introduced by LSI, was founded upon the ability of the defendant, through Agosta 96, to put an attractive and valuable development up for sale…. That enrichment is not said to have arisen in a direct fashion, by reason of the receipt of monies from the claimant, but by reason of the claimant's money having gone into the development, which gave the defendant bank something to sell, and as part of that sale arrangement this extra money (enriching money) was produced.

Argued: Mr Hibbert's point is that, even given whatever injustice may be said to have been perpetrated in the defendant's plans, what is not demonstrated as a result of all that is that there has been anything which the law of unjust enrichment would regard as an enrichment of the defendant at the expense of the claimant. There is no sufficient nexus between the payment of Mr Uren's money, the acts of the defendant bank and the benefits flowing from the arrangements with LSI.

Holding

The reason is that one can only say that the defendant had been enriched at the expense of Mr Uren in an unjust way by a very loose and generalised use of language and concepts which are not appropriate to a legal analysis of the situation. The answer to the point lies in an appreciation that the benefits to the bank do not, in law, amount to an enrichment at the expense of Mr Uren. Let it be allowed for the moment that the bank had indeed been enriched in the sense that it is financially better off at the end of the sequence of events than it was at the beginning, and that it has achieved that by the terms on which it realised its (or its subsidiaries) interest in the development. It cannot, in my view, be said that that was done at the expense of Mr Uren. Mr Uren's first 50,000 became lost to him at the latest when Arrish Limited became insolvent (as it apparently did) and went into receivership. The property was then sold away from Arrish Limited. At that point Mr Uren had (presumably) the benefit of a worthless unsecured claim against Arrish Limited. He had no claim against the bank at that stage. At that stage, the bank has not acquired the benefit of his money by any unjust means, even though it then acquired the property by taking it into a subsidiary. Mr Uren's next tranche of money (the 75,000) was first paid into the fighting fund. I assume that it was in no way dissipated there and survived intact so that it could be passed on at the next stage. That next stage was when the fighting fund provided the money to Santa Barbara Limited so that it could be used to discharge an outstanding indebtedness of Pitchcott to the bank (presumably arising when Pitchcott borrowed money to buy the development from Arrish Limited). At this stage Pitchcott probably owed the 75,000 to Mr Uren, or to someone else on his behalf. Although it was apparently intended at some stage that the purchasers should have shares, that never happened. When Mr Uren provided his money to the fighting fund, the fund either held it beneficially for him or he lent it to the fighting fund. When the money was passed into Santa Barbara Limited/Pitchcott, it seems likely to me that the transaction became one of loan. It may be that an alternative analysis would be that it was treated as an advance payment of the purchase price. Whichever analysis is the case, Mr Uren got whatever it was that the transaction gave rise to — some cause of...