#3668 - Defences To Unjust Enrichment - Aspects Of Obligations

Unjust Enrichment (III): defences

1. Defences

   1. Estoppel

      1. General

         1. Operation

• Estoppel will arise where D detrimentally changes his position in reliance of a representation made by C that a benefit was validly received. This is a complete bar because its effect is to stop C arguing that the elements of unjust enrichment have been established

  • United Overseas Bank v Jiwani (1976) (HC) – McKenna J – three conditions must be satisfied: [1] D led to believe that he or she is entitled to a benefit, [2] D relies on this, [3] D’s circumstances have changed so that restitution would be inequitable

  1. Justice of the Case

     • United Overseas Bank v Jiwani (1976) (HC) – McKenna J – estoppel will still fail if it is not just to require D to make restitution to C, e.g. if D was under a duty to inform of the mistake

  1. Defendant Led to Believe He Is Entitled to a Benefit

     1. General

• Must have been an unequivocal representation or a duty of accuracy to D which C breached

  • RE Jones v Waring and Gillow (1926) (HL) – Lord Sumner –these are cumulative conditions and both must be satisfied in every case

• The better view is that they are alternative:

  • United Overseas Bank v Jiwani (1976) (HL) – McKenna J –assumed that these are alternative conditions

  1. Representation of Fact

     • RE Jones v Waring and Gillow (1926) (HL) – representation must be collateral to the transfer and cannot be implied from the mere fact of voluntary transfer. It must be made by C rather than a third party

• Representations of fact may be express or implied

  • Deutsche Bank v Beriro (1895) ( ) – C mistakenly told D that a bill of exchange had been collected, and C paid money to D. C sought to recover this when he realised it was a mistake but was estopped because of the express representation he had made

  • Holt v Markham (1923) (CA) –C paid D money and then asked for it back, saying that D was not entitled to it because he was retired. D informed C that he was not in fact retired but didn’t hear back for another two months. C eventually asked for the money back, saying that it was mistaken on another ground. Scrutton LJ – found an implied misrepresentation in the fact that a payor should inform payee of any mistakes within a reasonable time of payment. This seems artificial because it is a misrepresentation from the mere fact of transfer.

    Bankes and Warrington LJJ –founded misrepresentation by the fact that C had failed to respond to the letter

  1. Duty of Accuracy

• Even if there was no representation, estoppel may be made out if C owed a duty of accuracy to D which was breached. The inference is that if such a duty is owed, C makes a representation by the virtue of the transfer

  • * National Westminster Bank v Barclays Bank (1975) (HC) – bank does not owe a duty of accuracy when it honours a cheque

  • Greenwood v Martins Bank (1933) (HL) – but where aware of facts relating to validity of the transfer of the payment, C may be under a duty to disclose these facts to D

  1. Reliance By Defendant

     1. General

• D must have relined on C’s representation. So D cannot rely on estoppel if he knew he was not entitled to a certain benefit but did not inform C of this

  1. Change of Circumstances

     1. Causation

• D must establish that but for the receipt of the benefit from C, his circumstances would not have changed in the way they did (e.g. if you were going to spend the money on something anyway estoppel is not available)

  • * Avon County Council v Howlett (1983) (CA) – overpaid teacher checked with local authority to see if he was being overpaid. He spent the additional amount and authority was estopped. In addition, teacher had adjusted their expenditure accordingly. Estoppel was still available notwithstanding that some of this had been spent on day-to-day things

  1. Detriment

• If D spends the money on something that increases in value, the detriment requirement will not have been satisfied

  • Holt v Markham (1895) (CA) – e.g. making a bad investment. * Avon County Council v Howlett (1983) (CA) – e.g. failing to claim social security benefits

  1. Consequences of a Successful Estoppel Defence

     1. General

• The consequence is that D may not have spent all the money he received, but restitution is entirely barred (e.g. even where he has only spent a small portion of the money received). This is because estoppel is an evidentiary defence that stops C adducing facts which contradict the representation on which D has detrimentally relied

  • * Avon County Council v Howlett (1983) (CA) – claim entirely barred even though only 546 out of 1007 had been spent

  1. De Minimis

• One way of reducing the harsh effects is to impose a de minmis principle

  1. Apportionment of Payments

     • Burrows – a single representation of fact could be divided into different representations which operate only to the extent that D’s position has been changed

• This is unworkable when only one payment has been made to D, but seems okay when a number of payments have been made

  1. Imposition of Conditions

     • Jones v Waring and Gillow (1926) (H) – Viscount Cave and Lord Atkinson – you could make application of the defence conditional on D accepting that he would return part of the benefit in respect of which his circumstances have not been changed

• Quaere whether court has the jurisdiction to get such an undertaking from D

  1. Shifting the Burden of Proof

     • * Avon County Council v Howlett (1983) (CA) –Cumming-Bruce LJ –burden of proof could be shifted so that once D has shown he has suffered detriment, C must prove that D’s circumstances have changed only in respect of part of the benefit he received

• Seems unworkable because C is unlikely to know of D’s financial circumstances

  1. Unconscionability

     • * Avon County Council v Howlett (1983) (CA) –Eveleigh LJ – might be unconscionable for D to retain part of the benefit in respect of which his position has not changed. Cumming-Bruce LJ – also recognised might lie on the ground that it would be inequitable for D to retain benefit, but did not elaborate. Slade LJ–less certain about this –too uncertain.

     • * National Westminster Bank v Somer (2002) (CA) –there is scope for equity to ensure that estoppel only applies to the extent of the detriment suffered. Potter LJ – court looks at the matter broadly and would not require D to demonstrate precise degree/value of detriment. On these facts, unconscionability was found when D spent 13,000 out of 54,000.

       Clarke LJ–depends on all the circumstances, including the nature of the representation and the steps taken in reliance of it. This is an example of equity mitigating the common law, but this does not involve discretion

• Virgo –difficult to say that it doesn’t have discretion

  1. Change of Position

     1. Nature

        1. Recognition

           • Lipkin Gorman v Karpnale (1991) (HL) –defendant not required to make restitution if he changed her position in good faith, but the defence only works to the extent of the change of position. This is not an all or nothing defence and is based on whether it is inequitable for D to make restitution

        2. Rationale

• One view is that change of position qualifies the enrichment received by D (e.g. because D has changed his position, his enrichment has accordingly been reduced). An alternative view, supported by its equitable nature, is that it means the enrichment is no longer unjust

• It could also be seen as acting on extent of enrichment and the unjust requirement

  • Virgo –best seen as both because [a] it protects security of receipt of enrichment enrichment and [b] operates as corrective justice unjust factor

  1. Discretion

• The foundation on equity also means that it is applied in a discretionary way

  • Commerzbank v Gareth Price-Jones (2003) (CA) – Mummery LJ – cases have tried to balance flexibility with rigidity. (HC) –Munby J – achieves practical justice and technicality and black letter law are to be avoided

  • Lipkin Gorman v Karpnale (1991) (HL) – Lord Goff –ecourt doesn’t have carte blanche to reject C’s claim because it is unjust. Restitution is given as of right and when denied, done so on the basis of legal principle

  1. Conditions for Establishing Change of Position

• [1] There must be a causative link between the receipt of the benefit by D and his change of position, so that but for the receipt, D would not have changed his position, [2] circumstances must make it inequitable for D to make restitution to C

  1. Causation

• Narrow view is that defence only arises if D has detrimentally relied on the validity of the receipt of the benefit. Wide view is that defence is available whenever D’s position has changed so that it is inequitable to make restitution, although a causal link between unjust enrichment and change of position is required

  • Scottish Equitable v Derby (2001) (CA) – preferred the wide approach, so the defence is not confined to situations where D relied on validity of the receipt. It is enough that the receipt caused D to change his position. The appropriate test is the but for test.

  1. Loss of Benefit Test of Causation

     1. General

• This is where D has dissipated the enrichment received from C. This satisfied the but-for test of causation because but for the receipt of the benefit D would not have lost

  1. Retention of a Product of the Benefit

• If D has retained a product of the benefit, the test is not satisfied because he has retained the benefit, albeit in a different form (the benefit was not lost)

  • Virgo –when D has substituted the benefit for something else, defence should not succeed because D has retained value of the benefit so has not suffered any detriment

  • Scottish...