#16715 - Unjust Enrichment - Aspects Of Obligations

the law on unjust enrichment

has the defendant received an enrichment?

1. Money: (its exchange value) always an enrichment (BP Exploration v Hunt)

2. Use value? What you save by not having borrow

   Sempra Metals v IRC 07 suggested yes = enrichment

   Providential Assurance v HMRC SC 18: no! Depended on HMRC v ITC reasoning - the use value is not ‘at expense of C’ thus not enrichment

3. Property a benefit, but susceptible to subjective devaluation

4. Services with an end product:

   value of the service (not end product) will be the enrichment unless the service by C caused the end product (the enrichment)

   Yeoman’s Row v Cobbe 08: Lord Scott locksmith unlocking jewel in safe analogy - enrichment is service

   here about planning permission - said didn’t cause the enrichment, just unlocked inherent value

   I’d disagree - point of application is because you don't know if you can get it

5. Pure services:

   e.g lecturer - doesn't leave a market residuum

   Beatson believes cannot be an enrichment

• Burrows: if people wiling pay for service must be an enrichment

6. Discharge of obligations

   Exall v Partridge 1799 yes enrichment - here discharge of rent liability

   Menalaou v Bank of Cyprus 13 also said yes - here sig on charge defective so charge over property void - bank claimed D unjustly enriched

7. Forgoing claim/waiving - enrichment Gibbs v Maidstone 10

   value of the enrichment

• Judged at time of receipt not judgement (Hunt)

• Starting point: objective test (but can be subjectively devalued)

  Objective test: 2 ways of establishing (L Clarke Benedetti)

• start with ordinary market value - what normal person would pay on market - then consider ‘objective value’ (things market would take into account about D e.g red carpet actress)

• Relevant factors: not generosity etc but poor credit rating, gender, occupation, health, age, status (Lord Reid e.g Vanity fair/film star)

• note some authorities suggest contract price as ceiling on value - Way v Latilla but current law is that is merely evidential (shows how parties valued benefit) - L Neuberger Benedetti

• also note that if inadequate performance, price of benefit received under void contract can be reduced (Brit Steel Corp v Cleveland Bridge)

  Subjective devaluation:

• Chance to show you personally didn’t value it to full extent of the objective value! (L Clarke Benedetti)

• recognised in Falcke v Scottish Imperial Insurance 1886: ‘liabilities shouldn't be forced upon people behind backs any more than you can confer a benefit upon a man against his will’

• but note Lord Reed in Benedetti rejected subjective devaluation - said only way avoid D incurring liabilities against will is within grounds of restitution (disagree)

• note SC in Benedetti rejected notion of subjective over-valuation save in ‘exceptional’ circs

• Burrows, Goff & Jones think should be possible

  Ways of overriding subjective devaluation

1. Incontrovertible Benefit

• Describes a benefit demonstrably apparent/not subject to debate (JS Bloor v Pavillion Developments)

• Types:

1. Money (cash) - BP v Hunt

2. Anticipation of necessary expenditure

• Legal necessity e.g discharging obligation - Exall v Partridge 1799 - to get carriage back from L, C paid D’s rent

• Factual necessity - Re Berkley Applegate 89 - C a liquidator who provided services for D in respect of trust prop - if C hadn't D would've had pay s.o else thus incontrovertible

3. Failure to return property i.e you actually don’t value it you'd give back - McDonald v Coys of Kensington 04 - numberplate

4. Benefit realised in money i.e receive something & sell for - incontrovertible Rover v Canon Fil)

5. Benefit realisable in money i.e would have value if sold - debatable

• McDonald v Coys of Kensington Mance endorsed idea that resisability sufficient

• Goff/Jones agree

• Burrows midway position - test is is it reasonably certain D will realise the positive benefit in future, acknowledging risk of ‘realisability’. Take into account circs of D - I agree

• Birks/Virgo say no - realisability insufficient - not good enough reason interfere with autonomy

2. Request: you must have valued it here, thus can’t subjectively devalue it

3. Free acceptance: will override subjective devaluation (L Clarke Benedetti)

• 3 elements:

1. Opportunity to reject - ‘Hobson’s choice’ - as in CC Greater Manc Police v Wigan Athletic - no opportunity reject additional unneeded police force w.o rejecting all of them

6. D knew/should’ve that not gratuitous - Rowe v Vale of White Horse

7. D failed reject the benefit

3. at the expense of C

1. Direct enrichment: D must be directly enriched at C’s expense

• HMRC v ITC 17 SC: ‘at expense of’ shows C is right person sue (suffered loss) but only where suffered directly

• here ITC paid too much VAT, customers charge too much VAT - but VAT paid in advance thus not exactly C -> HMRC - indirect thus claim failed

• e.g Costello v MacDonald 11: C paid to D (company), D bust, C tried sue directors - no - not direct!

• but HMRC SC did recognise circs where indirect may suffice (Lord Reid)

8. Indirect enrichment:

1. Agency: agent drops out of the picture & C can sue D directly

2. Assignment: 3P may have assigned rights to C

3. Sham transaction: if transaction with 3P a sham then ignored thus direct e.g Relfo Ltd v Varsani 14:

4. Co-ordinated transaction: if 3P & D coordinated from start then can treat as 1 transaction

5. Trace property: but this is just equity really

6. Discharge of debt

7. Interceptive subtraction (Virgo) C tries get property from T but D takes it - D enriched at C’s expense (Official Custodian for Charities v Mackey)

3. Incidental benefits:

• Where C acts selfishly, but D benefits

• TFL Management v LLoyds TSB 13: argued acting selfishly should bar claim - rejected

• but HMRC overruled TFL - benefits received by D must be result of intentional transfer

• but conflicts with Exall v Partridge - core UE case thus question this aspect of ITC

• note in TFL - C sued T for sum of but court held T owed to D - C had incurred legal expenses in ultimately fighting D’s case thus wanted restitution

4. Correspondence of gain & loss

• Birks thought that so long as C suffered some loss, could also get D’s gain

• Rush agrees

• points to ‘user damages’ as in Humbly v Trott

• Burrows: says no correspondence principle - like tracing

• but Virgo: corrective justice requires respect for the correspondence principle

• HMRC v ITC 17 SC: Lord Reed said essence of UE = correcting defective transfer from C-D - suggests we compensate loss, not additional gain!

• Any windfall should lie with the D because claim capped to extent of gain of D & loss of C - corresponds!

• So even if C loses 1m & D gains 2m, only required make restitution of 1m

• note there is no defence of passing on (Kleinwort Benson)

• affirmed in MnS v Commissioners of Customs & Excise 05 HoL: (teacakes rise) - practically sensible - difficult to prove! C may still have lost - may have had fewer customers et

  the unjust factors: grounds of restitution

1. Mistake:

• Ignorance v mistake: Lord Walker Pitt v Holt 13 encompasses 2 states of mind (1) An incorrect conscious belief (2) An incorrect tacit assumption

• but excludes causative ignorance

• ‘mis-predictions’ also excluded (because risk takers) - Kleinwort Benson

• mistake may be induced or spontaneous

• Mistake of law: traditionally barred but bar abolished (Kleinwort) confirmed in Deutsche Morgan Grenfell v IRC 06

• solicitors looked at past cases where paid & law now diff such that outcome would've been diff

• Nature of the mistake:

• originally had to be a ‘liability mistake’ - Kelly v Solari

• then ‘fundamental mistake’ Norwich Union Fire Insurance v Price

• now just ‘causative mistake’ - Barclays v Simms & Cooke 80

• just need to show mistake was a but for cause of the action (Kleinwort)

• note Nurdin & Peacock v Ramsden: C suspected rent owing but paid anyway, figuring he could get it back if not - money not owing thus claimed UE Nueberger LJ said not mistaken as suspected not owing but also thought could get back - mistake

• thus get the money thus no mistake thus mistake thus no mistake etc - vicious circle

• note limitation - if has legal effect then can’t recover - idea of basis (Barclays v Simms)

• Mistake in equity:

• if make a gift on trust by a deed, must rescind the deed to get restitution which requires a stricter test being satisfied - Pitt:

1. Mistake at time of voluntary disposition

2. Relevant mistake

3. Gravity of mistake is such that renders it unconscionable for recipient obtain payment

• unclear whether stricter test applies in all cases of gift - currently appears it does - Spaul v Spaul CA 14

• note Tettenborn believes that in case of gifts mistake must also be reasonable

• Burrows argues is not clear why test should be different from gifts

• Is claim to mistake barred?

1. Risk Taking:

• Deutchse Morgan Grenfell v IRC suspicion may bar restitution - constitutes conscious risk taking

• Marine Trade v Pioneer Freight Futures: test of probable risks: thinking you are probably correct with mere doubts = no bar, but thinking you are probably incorrect & acting anyway = restitution barred

• This can be used to defeat free acceptance for e.g

2. Discharge of liability

3. Payee’s honest belief as to entitlement

4. Full performance

5. Settled understanding of the law

6. Money due (Deutchse)

2. Failure of basis aka consideration:

   Consideration not meant in the strict contractual sense of word

   Rather, C must show that the basis for the transfer has failed in some way

   Fibrosa Spolka v Fairburn if payment the condition & the condition fails (but already paid) then D’s right to retain payment must fail

   Basis can mean 2 things

1. Failure by D to...