#10448 - 1. Unjust Enrichment - Aspects Of Obligations

Unjust Enrichment

1. Enrichment

• Step 1: Has the defendant received an enrichment?

  • Money –

    • Always an enrichment

    • Authority: “Money has the peculiar character of a universal medium of exchange. By its receipt, the recipient is inevitably benefited.” Goff J in BP Exploration (Libya) v Hunt (No.2)

  • Use of Money –

    • The fact that you have the use of money is enrichment in itself

    • Authority: Sempra Metals v IRC 2007

  • Property –

    • Is a benefit but susceptible to subjective devaluation (see (Step 4))

  • Services with an end product –

    • General principle: that the service will be the enrichment unless the service by the claimant actually caused the enrichment.

    • Authority: Lord Scott in Yeoman’s Row Management v Cobbe 2008

      • Note his analogy with a locksmith unlocking a jewel in a safe.

    • Authority: Goff J in BP Exploration (Libya) v Hunt (No.2)

      • Note Goff J thought in this particular case the enrichment should have been the service not the end product but felt bound by the Law Reform (Frustrated Contracts) Act 1943

  • Pure services –

    • If people are willing to pay for the service, should be an enrichment.

      • Note Beatson believes it cannot be an enrichment but Burrows thinks this is wrong.

  • Release of obligations –

    • Paying for a discharge of an obligation is an enrichment

    • Authority: Lord Kenyon & Gross J in Exall v Partridge 1799 – discharge of rent liability

    • Authority: Floyd LJ in Menalaou v Bank of Cyprus 2013 – signature on charge was defective therefore charge over property was void – bank claimed that the defendant was unjustly enriched.

  • Foregoing a claim –

    • Authority: “If everything else is equal I can see no principled distinction between a benefit consisting in money paid and a benefit consisting in a claim foregone”. Laws LK in Gibb v Maidstone and Tunbridge Wells NHS Trust 2010

• Step 2: Value of the enrichment –

  • Step 2.0: Judged at the time of receipt not at time of judgment

    • Authority: Goff J in BP Exploration (Libya) v Hunt (No.2) 1979

      • Note this problem would not have arisen in Hunt had the services rather than the end product been identified as the ‘enrichment’.

  • Step 2.1: Ordinary market value – what a normal person would pay on the market

  • Step 2.2: Objective value – what is the objective value given the defendant’s subjective position and status

    • Relative factors: not generosity etc. but poor credit rating, gender, occupation, state of health, age, status.

    • Lord Reid’s example of Vanity fair and film star.

    • Caused reconsideration of Sempra Metals Ltd v IRC 2007 – tax payment - benefit was the use not the receipt of money – issue for the House of Lords was how much the government could have borrowed the money for – called it subjective devaluation but SC in Benedetti said that this was merely objective value.

  • Authority: Lord Clarke in Benedetti v Sawiris 2013

  • Step 2.3: Role of contract –

    • (a) As a ceiling on recovery? Two lines of authority:

      • (i) Contract price as ceiling: one line of case law treats the contract valuation as a ceiling on the enrichment

      • Authority: “There can be no justification, even if a restitutionary claim is available, for recovery in excess of the contract limit. Such recovery in itself would be unjust since it would put the innocent party in a better position than he would have been if the contract had been fulfilled”. Cooke J in Taylor v Motability Finance 2004

      • Authority: Lord Aktin in Way v Latilla 1937 – would be wrong to completely depart from the figures agreed in the contractual discussion and fix the remuneration on an entirely different basis on which the services may never have been rendered at all.

      • (ii) Contract price not a ceiling:

      • Authority: Kerr LJ and Nicholls LJ in Rover International v Cannon Film Sales Ltd (No.3) – the suggested ceiling was considered unjust, since its operation would be one-sided limiting the quantum meruit in favour of the claimant whereas the benefits of the restitutionary position favoured the defendant. Considered the implications of accepting a ‘ceiling’ to be far-reaching and undesirable.

        • But note the very unusual facts of this case on which this decision was correct, the contract was made before the company had been incorporated and therefore null and void, thus there could be no attention paid to it for valuing the enrichment.

    • Current law: probably just strong evidence of how the parties valued the benefit but may act as a ceiling.

      • Authority: Lord Neuberger in Benedetti said it was only evidence.

    • (b) Inadequate performance?

      • Price of the benefit received under a void contract can be reduced if performance was inadequate

      • Authority: British Steel Corporation v Cleveland Bridge and Engineering Co 1984

• Step 3: Benefit must have been received –

  • Note red herring for Planche v Colburn – quantum meruit awarded in contract case where no breach of contract and no benefit received at all.

• Step 4: Subjective devaluation of the enrichment?

  • Chance to show that you personally did not value it to the full extent of the objective value.

  • Authority: Lord Clarke in Benedetti v Sawiris 2013

    • Note Lord Reid dissented, thought enrichment was a subjective test generally and that this was required to protect the autonomy of the defendant. ‘Palm tree justice’ approach.

  • Authority: “Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will” (Bowen LJ in Falcke v Scottish Imperial Insurance 1886)

    • Note the Supreme Court in Benedetti rejected the notion of subjective over-valuation save in ‘exceptional’ circumstances, despite Burrows, Goff & Jones arguing that it should be possible.

• Step 5: Does either means of defeating subjective devaluation apply?

  • 5.1. Incontrovertible benefit –

    • Question of fact that depends on the circumstances.

    • Authority: “an unquestionable benefit, a benefit which is demonstrably apparent and not subject to debate and conjecture”. Rural Municipality of Peel v Her Majesty the Queen in Right of Canada 1993

    • Authority: Lord Clarke in Benedetti v Sawiris – recognised it as a means for defeating subjective devaluation

    • Authority: JS Bloor v Pavillion Developments 2008

  • Types of incontrovertible benefit –

  • (1) Anticipation of necessary expenditure –

    • Legal necessity – Authority: Gross J & Le Blanc J in Exall v Partridge 1799

    • Factual necessity – Authority: Greer LJ in Craven-Ellis v Canons Ltd 1936

  • (2) Benefit realised in money –

    • Authority: Rover International Ltd v Cannon Film Sales Ltd (No.3) 1989

  • (3) Benefit realisable in money –

    • Authority: Lord Mance in McDonald v Coys of Kensington – endorsed the conclusion that a personalised mark was an incontrovertible benefit, reached either on “realisability” or if not sufficient the ability to realise in the future coupled with enjoyment of its possession and use in the meantime.

      • Note the academic debate in this area – Goff & Jones formulate the rule as being merely sufficient that the benefit is realisable in money, Burrows adopts a midway position where by the test is whether it sis reasonably certain that the defendant will realise the positive benefit in the future, acknowledging the risk of “realisability”. Burrows argues you must take into account the circumstances of the defendant. Birks adopts an even stricter test of requiring actual realisation, but this was seen as too restrictive in McDonald. Virgo says Birks is right, a test of “realisability” is too great an incursion into the defendant’s autonomy.

  • (4) Readily returnable benefit –

    • Authority: Mance LJ in McDonald v Coys of Kensington 2004

  • 5.2. Free acceptance –

    • Where the defendant, as a reasonable man, ought to have know that the claimant expected to be paid for services and failed to take an opportunity to reject them. If services were requested, this will also constitute free acceptance.

• Authority: acknowledged by Lord Clarke in Benedetti v Sawiris

• Note Birks is a big proponent whereas Burrows is an ‘odd man out’ (Birks) and would like to see it rejected

• Three elements –

• Step 5.2.1: Opportunity to reject the benefit

  • Authority: Chief Constable of the Greater Manchester Police v Wigan Athletic AFC 2008 – police force case where it was held there was no opportunity to reject additional police force without rejecting all of them – ‘Hobson’s Choice’.

• Step 5.2.2: Knew (or should have known) that the benefit was not provided gratuitously

  • Authority: Lightman J in Rowe v Vale of White Horse DC 2003

• Step 5.2.3: Defendant failed to reject the benefit

2. At the Expense of the Claimant

• Rationale? Unjust enrichment alone does not identify the claimant, must be at their expense to give them a right of action.

  • Authority: Goulding J in Chase Manhattan NA v Israel British Bank (London) 1981

• Step 1: Is the enrichment direct?

  • Fundamental principle – the ‘privity principle’ – is you must be able to show a direct causative link between the transfer and the receipt.

    • Authority: Lord Hobhouse in The Colonial Bank v The Exchange Bank of Yarmouth, Nova Scotia 1885

    • Example: Etherton LJ in Costello v MacDonald 2011

      • Note Tettenborn’s argument that there ought to be no restitution where a defendant has lawfully received a benefit from a third party.

  • If the requirement is strictly interpreted, it means that the claimant can only establish hat the defendant has been unjustly enriched where the defendant has obtained a benefit directly from the claimant.

• Step 2: If not, does the indirect enrichment fallen within an exception?

  • Exception 1: Vindication of property...