#6777 - Pan Ocean Shipping V. Credit Corp. - Restitution of Unjust Enrichment BCL

Pan Ocean Shipping v. Credit Corp.

Facts

The appellant company, Pan Ocean Shipping Co Ltd (Pan Ocean), is seeking to recover from the respondent company, Creditcorp Ltd (Creditcorp), an instalment of time charter hire paid by Pan Ocean as time charterers of the vessel Trident Beauty (the vessel) to Creditcorp as assignee from the disponent owner of the vessel, Trident Shipping Co Ltd (Trident), of receivables due under the charterparty, such assignment having been made as part of an arrangement under which Creditcorp, on behalf of a group of investors, made finance available to Trident. Pan Ocean is not seeking to recover the hire instalment from Trident, because it does not consider Trident worth suing. Instead, it seeks to recover the money from Creditcorp on the ground of total failure of consideration (Pan Ocean had repudiated the contract in the meanwhile), since the vessel was off hire for the whole of the period in respect of which the relevant hire instalment was paid.

Holding

Lord Goff

All this is important for present purposes, because it means that, as between shipowner and charterer, there is a contractual regime which legislates for the recovery of overpaid hire. It follows that, as a general rule, the law of restitution has no part to play in the matter; the existence of the agreed regime renders the imposition by the law of a remedy in restitution both unnecessary and inappropriate. Of course, if the contract is proved never to have been binding, or if the contract ceases to bind, different considerations may arise, as in the case of frustration.

Here, it is true, the contract was prematurely determined by the acceptance by Pan Ocean of Trident's repudiation of the contract. But, before the date of determination of the contract, Trident's obligation under cl 18 to repay the hire instalment in question had already accrued due; and accordingly that is the relevant obligation, as between Pan Ocean and Trident, for the purposes of the present case.

It follows that, in the present circumstances and indeed in most other similar circumstances, there is no basis for the charterer recovering overpaid hire from the shipowner in restitution on the ground of total failure of consideration.

It is against this background that we have to consider Pan Ocean's claim now made against Creditcorp for repayment of the hire instalment paid to it as assignee of the charter hire. First, although the benefit of the contract debt had been assigned to Creditcorp, with the effect that payment to Creditcorp by Pan Ocean constituted a good discharge of the debt, nevertheless the burden of the contract remained upon Trident. From this it follows that Trident remained contractually bound to repay to Pan Ocean any overpaid hire, notwithstanding that such hire had been paid not to Trident but to Creditcorp as assignee.

His argument proceeded on the basis that, in ordinary circumstances, a charterer has alternative remedies against the shipowner for the recovery of overpaid hire, either in contract or in restitution; and that here, since the hire had been paid to Creditcorp as assignee, Pan Ocean's remedy in restitution lay against Creditcorp in place of Trident. However, for the reasons I have already given, I am unable to accept this argument. This is because, in my opinion, Pan Ocean never had any remedy against Trident in restitution on the ground of failure of consideration in the present case, its only remedy against Trident lying under the contract.

In truth, all that happened in the present case was that the benefit of receiving the hire payment was assigned to Creditcorp and, in accordance with the terms of the charter, Trident remained liable to repay to Pan Ocean any part of the hire so paid to Creditcorp which was not earned. Under the charter there were two separate contractual obligations—an obligation on Pan Ocean to pay instalments of hire in advance, and an obligation on Trident to repay any part of any such instalment which was not earned. The assignment to Creditcorp of Trident's right to receive advance hire payments left undisturbed Trident's obligation to repay any hire which was unearned; and I cannot see that in these circumstances the assignment to Creditcorp can have carried with it any obligation upon Creditcorp, additional to the contractual obligation imposed upon Trident, to repay unearned hire on the ground of failure of consideration.

Restitution must not be used to reallocate contractually allocated risks

I am of course well aware that writers on the law of restitution have been exploring the possibility that, in exceptional circumstances, a plaintiff may have a claim in restitution when he has conferred a benefit on the defendant in the course of performing an obligation to a third party (see eg Goff and Jones on Restitution (4th edn, 1993) pp 55ff, and (for a particular example) Burrows on Restitution (1993) pp 271–272). But, quite apart from the fact that the existence of a remedy in restitution in such circumstances must still be regarded as a matter of debate, it is always recognised that serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract. Moreover, it would in any event be unjust to do so in a case such as the present where the defendant, Creditcorp, is not the mere recipient of a windfall but is an assignee who has purchased from Trident the right to receive the contractual debt which the plaintiff, Pan Ocean, is now seeking to recover from Creditcorp in restitution despite the facts that the relevant contract imposes on the assignor (Trident) an obligation of...