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1. EnrichmentStep 1: Has the defendant received an enrichment?
o 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)o
oNote 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 -
1 o 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) 1979Note this problem would not have arisen in Hunt had the services rather than the end product been identified as the 'enrichment'.
o Step 2.1: Ordinary market value - what a normal person would pay on the market
o 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
o 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. o 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.
2 ?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 -
o 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?
o Chance to show that you personally did not value it to the full extent of the objective value.
o Authority: Lord Clarke in Benedetti v Sawiris 2013
? Note Lord Reid dissented, thought enrichment was a
osubjective 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?
o 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
o Types of incontrovertible benefit - o (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 -o
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
o 5.2. Free acceptance -
? Where the defendant, as a reasonable man, ought to haveknow 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 ClaimantRationale? Unjust enrichment alone does not identify the claimant, must be at their expense to give them a right of action.
4 o Authority: Goulding J in Chase Manhattan NA v Israel British Bank (London) 1981Step 1: Is the enrichment direct?
o 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 2011oNote 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?
o Exception 1: Vindication of property rights or wrongdoing-
? Not unjust enrichment but can succeed despite indirectness
? Authority: Lipkin Gorman v Karpnale
? Authority: Nourse LJ in Official Custodian for Charities v o
? Note this is not really an exception. Exception 2: Economic reality -
? Authority: Investment Trust Companies v The Commissioners for Her Majesty's Revenue and Customs 2012 - involved tax payers who had borne the burden of excess tax owed by suppliers of services.
? Four prerequisites -?1.1 - Close causal connection between transfer by claimant and benefit by defendant
? 1.2 - Claimant must have exhausted all remedies against direct recipient
? 1.3 - Allowing restitution must not conflict with any contract
? 1.4 - Any remedy awarded has the effect of depriving the defendant of gain and not seeking to compensate the claimant for loss. Authority: Henderson J in Investment Trust Companies v The Commissioners for Her Majesty's Revenue and Customs 2012 Authority: Menelaou v Bank of Cyprus plc 2013Note that this pushes enrichment quite far.
o Exception 3: Agency -
? Where the third party happens to be the agent of the defendant, they effectively drop out of the picture and the
5 claimant can sue the defendant directly. Not strictly an exception.
o Exception 4: Interceptive subtraction -
? Where a third party owes money to the claimant but actually?pays it to the defendant, the defendant is seen to have intervened and taken the enrichment therefore the claimant, in some circumstances, can sue the defendant for what they otherwise would have received. Theory developed by Birks, but Smith has contended that it is unnecessary in most cases. Many of the types of cases that Birks seeks to explain can be explained on the basis of direct subtraction. Smith also argues that the theory is flawed in its circularity. Note Smith thinks this is better dealt with simply by asking the crucial question of whether the third party discharges the debt owed to C by paying D, if he does, it is a special case and there is a claim for restitution, if not, it is the general case and there is no claim. Usually arises where there is a contract or some other current obligation between third party and the claimant. Two prerequisites -?
3.1 - Must be inevitable that the claimant would have received the enrichment had the third party not intervened. o Authority: Official Custodian for Charities v Mackey (No.2) 1985 o Note the difficulties with formulating the certainty required here.
? 3.2 - Defendant must not have had a right to the benefit or have earned it. o Authority: Boyster v Dodsworth Where might interceptive subtraction apply? -?
Usurpation of office cases o Authority: Boyter v Dodsworth 1796 - defendant pretended to be the claimant, taking tourists round Salisbury cathedral, held there was no liability as money collected had been earned.
Step 3: Even if the enrichment is direct, is it incidental?
o Even a direct benefit will not be at the expense of the claimant if he acted in his own self-interest
? Authority: TFL Management Ltd v Lloyds TSB Bank plc 2013
? But: in the Court of Appeal in TFL Management Beatson LJ rejected the principle of incidental benefit as too vague therefore may not be a bar.Step 4: Does the claimant's loss correspond to the defendant's gain?
o Controversy: Does the principle apply in English law?
? Virgo believes that corrective justice requires respect for the correspondence principle whereas Birks thinks that so long
as the claimant has suffered some loss, we are concerned solely with the defendant's gain, Rush agrees with this view. Birks observes that the evidence for and against the existence of the principle is 'finally balanced' but uses three examples of cases to show that it is not necessary -
? (i) Lord Mansfield in Hambly v Trott - someone who uses another's horse without permission must pay a reasonable sum for its use even if the claimant would not have used it and the horse is better off for the exercise. But not at the time explained in terms of unjust enrichment but would be nowadays.
? (ii) Court of Appeal has established that passing on does not matter for recovery o Authority: Kleinwort Benson v Birmingham CC 1997
? (iii) Where the claimant brings a claim to a substitute asset, the claim is successful despite the asset being worth far more, this may however this is perhaps most likely explicable on the basis that unjust enrichment no longer has a role in these cases. o Authority: Foskett v McKeown 2001?
oBurrows believes there should be no correspondence principle on the basis that the claimant's loss is irrelevant, consistently with tracing where an innocent donee invests money in shares that go up in value and the claimant can trace into them. Authority: Lord Hope in Sempra Metals v IRC 2007 obiter said that had the defendant borrowed at a more favourable rate than what the claimant had lost, the defendant's enrichment would be greater than the claimant's loss but the defendant would still be required to make full restitution - tantamount to saying there is no correspondence principle. The process is 'one of subtraction, not compensation'.
Step 5: Is passing on relevant?
o No defence of passing on in unjust enrichment.
? Authority: Kleinwort Benson v Birmingham 1996
? Authority: Roxborough v Rothams of Pall Mall 2002
? Note this may have implications for whether
the correspondence principle applies in English law, some see it as support for not having the principle. But surely this arises as a defence, at a later stage than the crystallisation of liability therefore should be too remote. Exception where the contract is valid but the performance is impossible.
? Authority: Callinan J in Roxborough v Rothmans 2001
? Note Virgo does not believe in exceptions to the presence of basis principle and believes this case is unjustifiable.
3. Unjust Factors
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