#6776 - Lipkin Gorman V. Karpnale I - Restitution of Unjust Enrichment BCL

Lipkin Gorman v. Karpnale

Facts

Cass was a partner in the appellant firm of solicitors, Lipkin Gorman. Cass withdrew 323,222.14 from the solicitors' bank account. The sum of 100,313.16 was replaced, recovered or accounted for, but the balance of 222,908.48 was money which Cass stole from the solicitors and proved to be irrecoverable from him. Cass staked 561,014.06 at the gaming tables of the Playboy Club, a licensed casino owned and operated by the respondent, Karpnale Ltd. Cass won 378,294.06. After making adjustments for certain cheques, the club agreed that the club won and Cass lost overall, in a matter of months, the sum of 174,745. The parties also agreed that the maximum gross personal resources of Cass amounted to 20,050 and that at least the sum of 154,695 won by the club and lost by Cass was derived from money stolen from the solicitors. The club acted innocently throughout and was not aware that the club had received 154,695 derived from the solicitors until the solicitors claimed restitution.

The club was enriched as and when Cass staked and lost to the club money stolen from the solicitors amounting in the aggregate to 300,000 or more. But the club paid Cass when he won and in the final reckoning the club only retained 154,695 which was admittedly derived from the solicitors’ money. The solicitors can recover the sum of 154,695 which was retained by the club if they show that in the circumstances the club was unjustly enriched at the expense of the solicitors.

Holding

Lord Templeman

In my opinion in a claim for money had and received by a thief, the plaintiff victim must show that money belonging to him was paid by the thief to the defendant and that the defendant was unjustly enriched and remained unjustly enriched. An innocent recipient of stolen money may not be enriched at all; if Cass had paid 20,000 derived from the solicitors to a car dealer for a motor-car priced at 20,000, the car dealer would not have been enriched. The car dealer would have received 20,000 for a car worth 20,000. But an innocent recipient of stolen money will be enriched if the recipient has not given full consideration. If Cass had given 20,000 of the solicitors' money to a friend as a gift, the friend would have been enriched and unjustly enriched because a donee of stolen money cannot in good conscience rely on the bounty of the thief to deny restitution to the victim of the theft.

In the present case Cass stole and the club received 229,908.48 of the solicitors' money. If the club was in the same position as a donee, the club nevertheless in good faith allowed Cass to gamble with the solicitors' money and paid his winnings from time to time so that when the solicitors' sought restitution, the club only retained 154,695 derived from the solicitors. The question is whether the club which was enriched by 154,695 at the date when the solicitors sought restitution was unjustly enriched.

The club claims that the club gave consideration for the sum of 154,695 by allowing Cass to gamble and agreeing to pay his winnings and therefore the club was not enriched or, alternatively, was not unjustly enriched. The solicitors claim that the club acquired 154,695 under void contracts and that as between the club and the solicitors from whom the money was derived, the club is in no better position than an innocent donee from the thief, Cass.

If a thief deposits stolen money in a building society, the victim is entitled to recover the money from the building society without producing the pass book issued to the thief. As against the victim, the building society cannot pretend that the building society gave good consideration for the acceptance of the deposit. The building society has been unjustly enriched at the expense of the victim. Of course the building society has a defence if the building society innocently pays out the deposit before the building society realises that the deposit was stolen money. But in the present case the club retained some of the stolen money. The club cannot as against the solicitors retain the stolen money save by relying on the gaming contracts which, as between the club and Cass, entitled the club to retain the solicitors' money which Cass lost at the gaming table. Those gaming contracts were void. The club remains unjustly enriched to the extent of 154,695….. A gambling loss, whenever paid, is a completed voluntary gift from the loser to the winner. But Cass was gambling with the money of the solicitors who have never gambled and never made a voluntary gift to the club.

Cass staked with the club money which he had stolen from the solicitors. The solicitors have been content to assume that in addition Cass staked 20,050 of his own money. Cass also staked money which from time to time he won from the club during the course of his doomed gambling. At the date when the solicitors claimed restitution the club had recovered all its own money and were left with 174,745 net winnings. The club is entitled to assert and the solicitors cannot disprove that 20,050 of the net winnings was money which had belonged to Cass. There remained 154,695 which must have been money stolen from the solicitors. My conclusion is that the club has no right to retain stolen money received by the club from the thief. Repayment by the club to the victim, limited to the net amount of stolen money which the club retains, will not inflict a net loss on the club as a result of the transactions between the club and the thief. In the present case money stolen from the solicitors by Cass has been paid to and is now retained by the club and ought to be repaid to the solicitors. The solicitors will recover part of their stolen money and the club will only lose the winnings the club was not entitled to make out of the solicitors' money.

In the present case the money was received by the club fairly and honestly but not upon a valuable and bona fide consideration.

In the instant case Alliott J. declined to extend the categories of quasi-contract so as to enable the owner of stolen property to recover the stolen money from the person to whom the thief has lost it gambling: see [1987] 1 W.L.R. 987, 992-993. But the contracts under which the club received the stolen money were void under section 18 of the Act of 1845 and the club was in no better position than a donee. On principle and on authority a donee is bound to reimburse the victim for stolen money received and retained by the donee and, in the circumstances, the club was unjustly enriched to the extent that the solicitors' money was retained by the club.

Lord Goff

On the contrary, here the money had been paid to the respondents by a third party, Cass; and in such a case the appellant has to establish a basis on which he is entitled to the money. This (at least, as a general rule) he does by showing that the money is his legal property, as appears from Lord Mansfield's judgment in Clarke v. Shee and Johnson. If he can do so, he may be entitled to succeed in a claim against the third party for money had and received to his use, though not if the third party has received the money in good faith and for a valuable consideration. The cases in which such a claim has succeeded are, I believe, very rare: see the cases, including Clarke v. Shee and Johnson, collected in Goff and Jones, The Law of Restitution, 3rd ed. (1986), p. 64, note 29. This is probably because, at common law, property in money, like other fungibles, is lost as such when it is mixed with other money. Furthermore, it appears that in these cases the action for money had and received is not usually founded upon any wrong by the third party, such as conversion; nor is it said to be a case of waiver of tort. It is founded simply on the fact that, as Lord Mansfield said, the third party cannot in conscience retain the money - or, as we say nowadays, for the third party to retain the money would result in his unjust enrichment at the expense of the owner of the money.

However, your Lordships are not concerned with an equitable tracing claim in the present case, since no such case is advanced by the solicitors, who have been content to proceed at common law by a personal action, viz. an action for money had and received. I should add that, in the present case, we are not concerned with the fact that money drawn by Cass from the solicitors' client account at the bank may have become mixed by Cass with his own money before he gambled it away at the club. For the respondents have conceded that, if the solicitors can establish legal title to the money in the hands of Cass, that title was not defeated by mixing of the money with other money of Cass while in his hands.

Tracing money into the Club

I am not prepared to depart from decisions of such high authority as these. They show that, where a banker's cheque payable to a third party or bearer is obtained by a partner from a bank which has received the authority of the partnership to pay the partner in question who has, however, unknown to the bank, acted beyond the authority of his partners in so operating the account, the legal property in the banker's cheque thereupon vests in the partner. The same must a fortiori be true when it is not such a banker's cheque but cash which is so drawn from the bank...