‘At the expense of’: linking claimant and defendant in the law of unjust enrichment

ABSTRACT

This paper argues that, accepting the division of unjust enrichment claims into enrichment by rights and by value, attribution mechanisms in proprietary restitutionary (eg rescission) and personal restitutionary claims are based on failure to realise exchange potential either of the value of a thing or rights to the thing. It suggests both can therefore be based on corrective justice, as corrective justice is concerned with intentional transactions in which the defendant receives value or rights the exchange potential of which are not properly realised or realisable for the claimant’s benefit. It further argues that recent case law in the United Kingdom Supreme Court supports this view by requiring intentional transactional links between claimant and defendant and that case law in both proprietary (tracing) and personal cases is coalescing around this understanding. The view that a ‘but-for’ link between claimant and defendant suffices in unjust enrichment claims is therefore wrong.

KEYWORDS:

• Unjust enrichment
• at the expense of
• tracing
• corrective justice
• exchange potential

Acknowledgements

This paper was presented at the SLS conference at University College Dublin in September 2017; many thanks to the anonymous referees, Pinar Akman, Ilias Trispiotis and Roger Halson for their kind comments on later drafts and of course the participants in the discussion in Dublin. All errors are naturally my own.

Notes

1 There is some dispute about this, but there appears in the English courts little appetite to move across to a more Civilian absence of basis approach. See Duncan Sheehan ‘Unjust Factors or Restitution of Transfers Sine Causa’ [2008] Oxford University Comparative Law Forum 1.

2 Falcke v Scottish Imperial Insurance (1886) 34 Ch D 234 (UK Court of Chancery).

3 Eli Ball, Enrichment at the Claimant’s Expense: Attribution Rules in Unjust Enrichment (Hart Publishing Oxford 2016).

4 Charles Mitchell, Paul Mitchell and Stephen Watterson (eds), Goff and Jones: The Law of Unjust Enrichment (9th edn, Sweet and Maxwell 2016) para 6.02; See eg Kleinwort Benson v Birmingham CC [1997] QB 380, 400 (England and Wales Court of Appeal (EWCA)).

5 Menelaou v Bank of Cyprus [2015] UKSC 66 (UK Supreme Court); ITC v HMRC [2017] UKSC 29; Lowick Rose v Swynson Ltd [2017] UKSC 32; Prudential Assurance Co Ltd v HMRC [2018] UKSC 39.

6 Andrew Burrows, The Law of Restitution (3rd edn, Oxford University Press 2011) 62.

7 Duncan Sheehan, ‘Subtractive and Wrongful Enrichment: Identifying Gain in the Law of Restitution’ in Charles EF Rickett (ed), Justifying Private Law Remedies (Hart Publishing 2008) 333.

8 On which see eg Michael Rush, The Defence of Passing On (Hart Publishing 2006).

9 [2013] SGCA 36 (Singapore Court of Appeal).

10 Foskett v McKeown [2000] UKHL 29 (UK House of Lords) says not, but that high authority is not universally accepted as correct. Mitchell, Mitchell and Watterson (n 4) paras 8.152–8.154.

11 See Whittaker v Campbell [1984] QB 318 (Divisional Court).

12 James Edelman and Elise Bant, Unjust Enrichment (2nd edn, Hart Publishing 2016) 42.

13 Robert Chambers, ‘Two Kinds of Enrichment’ in Robert Chambers, Charles Mitchell and James Penner (eds), Philosophical Foundations of the Law of Unjust Enrichment (Oxford University Press 2009) 242, 277; Andrew Lodder, Enrichment in the Law of Unjust Enrichment and Restitution (Hart Publishing 2012).

14 Something that Robert Stevens argues is not done by current thinking: Robert Stevens, ‘The Unjust Enrichment Disaster’ (2018) 134 Law Quarterly Review 574.

15 Eli Ball, ‘Abandonment and the Problem of Incidental Gains in the Law of Restitution of Unjust Enrichment’ [2011] Restitution Law Review 49.

16 ITC v HMRC (n 5) [42].

17 Ball, Enrichment at the Claimant’s Expense (n 3) 44.

18 Richard Sutton, ‘Enigma and Coherence’ [2009] Restitution Law Review 1.

19 Stephen Watterson, ‘“Direct Transfers” in the Law of Unjust Enrichment’ (2011) 64 Current Legal Problems 435, 438.

20 David Miller, ‘Justice’ in Edward N Zelta (ed), Stanford Encyclopaedia of Philosophy (Fall edn, 2017) <https://plato.stanford.edu/entries/justice/#CorrVersDistJust> accessed 17 April 2020.

21 See J Gardner, ‘Corrective Justice, Corrected’ (2012) 12 Diritto & Questioni Pubbliche 9.

22 ibid 34–35.

23 See eg Lionel Smith, ‘Restitution: The Heart of Corrective Justice’ (2001) 79 Texas Law Review 2115.

24 Lionel Smith, ‘Property, Unjust Enrichment and the Structure of Trusts’ (2000) 116 Law Quarterly Review 412, 419–20.

25 Zoë Sinel, ‘Concerns about Corrective Justice’ (2013) 26 Canadian Journal of Law and Jurisprudence 137, 152.

26 ibid 138, 148.

27 ibid 153–54.

28 ibid 153.

29 ibid.

30 Ball, Enrichment at the Claimant’s Expense (n 3) 35–44; Lodder (n 13) 12–22.

31 Ball, Enrichment at the Claimant’s Expense (n 3) 36–38—a caveat to this exists below.

32 Duncan Sheehan, ‘Mistake, Failure of Consideration and the Planning Theory of Intention’ (2015) 28 Canadian Journal of Law and Jurisprudence 155, 165.

33 Ball, Enrichment at the Claimant’s Expense (n 3) 100.

34 Based on a famous dictum of Bowen LJ in Falcke (n 2).

35 Ernest Weinrib, ‘The Normative Structure of Unjust Enrichment’ in Charles Rickett and Ross Grantham (eds), Structure and Justification in Private Law: Essays for Peter Birks (Hart Publishing 2008) 21, 28.

36 ITC v HMRC (n 5).

37 Ball, Enrichment at the Claimant’s Expense (n 3) 26–27.

38 James Penner, ‘Value, Property and Unjust Enrichment: Trusts of Traceable Proceeds’ in Robert Chambers, Charles Mitchell and James Penner (eds), Philosophical Foundations of the Law of Unjust Enrichment (Oxford University Press 2009) 306, 311–12; Duncan Sheehan, ‘The Property Principle and the Structure of Unjust Enrichment’ [2011] Restitution Law Review 138, 156–57.

39 Ball, Enrichment at the Claimant’s Expense (n 3) 140–41.

40 ibid 141–42.

41 ibid 181–82.

42 Andrew Burrows, ‘At the Expense of the Claimant: A Fresh Look’ [2018] Restitution Law Review 167, 170.

43 [1969] 2 QB 152 (Nottingham Assizes).

44 Robert Stevens, ‘Three Enrichment Issues’ in Andrew Burrows and Alan Rodger (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford University Press 2006) 49, 63–64.

45 Burrows, ‘At the Expense of the Claimant’ (n 42) 170; Stevens, ‘The Unjust Enrichment Disaster’ (n 14) 581; See also Lionel Smith ‘Defences and the Disunity of Unjust Enrichment’ in Andrew Dyson, James Goudkamp and Frederick Wilmot-Smith (eds), Defences in Unjust Enrichment (Hart Publishing 2016).

46 Stevens, ‘The Unjust Enrichment Disaster’ (n 14) 578–79.

47 ibid 575.

48 Lionel Smith, ‘Restitution: A New Start’ in Peter Devonshire and Rohan Havelock (eds), The Impact of Equity and Restitution in Commerce (Hart Publishing 2019) 91, 112.

49 I discuss the distinction between ‘future intention’ I intend to X tomorrow: ‘intention with which’ I pay with the intention to X and intentionality ‘I X intentionally’ in Sheehan, ‘Mistake, Failure of Consideration and the Planning Theory of Intention’ (n 32) 157–60.

50 Questions of whether mistake should give rise to proprietary relief or whether in such cases the defendant receives a right unjustly—see eg Chase Manhattan v Israel-British Bank [1981] Ch 105 (Chancery)—do not therefore arise.

51 Chambers (n 13) 242.

52 Lodder (n 13) ch 5.

53 Aruna Nair, Claims to Traceable Proceeds: Law, Equity and the Control of Assets (Oxford University Press 2018) para 6.42.

54 Lodder (n 13) 113–14.

55 Chambers (n 13) 258–61, although in a personal claim that definitely would matter.

56 [1982] Ch 183 (Chancery).

57 Tatiana Cutts, ‘Dummy Asset Tracing’ (2019) 135 Law Quarterly Review 140, 142.

58 Burrows, ‘At the Expense of the Claimant’ (n 42) 179.

59 Lodder (n 13) 218.

60 ibid 218–19.

61 ibid 59.

62 ibid 57; Birke Häcker, ‘Proprietary Restitution After Impaired Consent Transfers: A Generalised Power Model’ (2009) 68 Cambridge Law Journal 324.

63 Nair (n 53) para 6.73.

64 Sinel (n 25) 154; Lodder (n 13) 131–34.

65 Eg Kleinwort Benson v Birmingham City Council [1997] QB 380 (CA) 400.

66 Burrows, The Law of Restitution (n 6) 69–71; Burrows reaffirms this position in ‘At the Expense of the Claimant’ (n 42) 171 where he links it to the civil law idea of performance. See also Peter Birks, Unjust Enrichment (2nd edn, Clarendon Press 2005) ch 5.

67 Burrows, ‘At the Expense of the Claimant’ (n 42) 168.

68 Andrew Tettenborn, ‘Lawful Receipt—A Justifying Factor’ [1997] Restitution Law Review 1, 5.

69 ibid 7.

70 ITC v HMRC (n 5) [51]; Agip (Africa) Ltd v Jackson [1990] Ch 265, 287 (Millett J) (Chancery).

71 Trustor AB v Smallbone [2000] EWCA Civ 150 [62-65]; Watterson, ‘“Direct Transfers” in the Law of Unjust Enrichment’ (n 19) 454–55.

72 Watterson, ‘“Direct Transfers” in the Law of Unjust Enrichment’ (n 19) 455–56.

73 Eg Graham Virgo, The Principles of the Law of Restitution (3rd edn, Oxford University Press 2015) 105.

74 [2011] EWCA Civ 930.

75 [2005] EWHC 2529 (Ch) (High Court of England and Wales).

76 ibid [23].

77 [2012] EWHC 458 (Ch).

78 ibid [67].

79 ibid [68].

80 ibid [72]; it is difficult to see ‘reality’ as an exception to anything though.

81 Agip (Africa) Ltd (n 70).

82 ibid 287.

83 Edelman and Bant (n 12) 98–99.

84 (1740) Barn Ch 324 (Chancery).

85 Edelman and Bant (n 12) 98.

86 [2001] BPIR 95 (EWCA).

87 Relfo v Varsani [2014] EWCA Civ 360; Richard Nolan, ‘Civil Recovery after Fraud’ (2015) 131 Law Quarterly Review 8; Stephen Watterson, ‘Recovering Misapplied Corporate Assets from Remoter Recipients’ (2014) 73 Cambridge Law Journal 496.

88 Ball, Enrichment at the Claimant’s Expense (n 3) 167–68.

89 ibid 168; [2012] EWHC 2168 (Ch) [88].

90 Watterson, ‘“Direct Transfers” in the Law of Unjust Enrichment’ (n 19) 442, 448.

91 Mitchell, Mitchell and Watterson (n 4) para 6.38; ITC v HMRC (EWHC) (n 77) being one example.

92 ITC v HMRC (n 5).

93 Charles Mitchell, ‘Restitutionary Claims by Indirect Taxpayers’ in Charles Mitchell, Birke Häcker and Steven Elliott (eds), Restitution of Overpaid Tax (Hart Publishing 2013) 111, 115–16.

94 ITC v HMRC (n 5) [30].

95 ibid [71].

96 ibid [71].

97 ibid [32].

98 ibid [42]–[43].

99 ibid [72].

100 ibid [50].

101 Eg Courage v Crehan [2001] ECR-I 6297 (European Court of Justice).

102 Menelaou (n 5).

103 Mitchell, Mitchell and Watterson (n 4) paras 7.06–7.08.

104 As pointed out by the Supreme Court itself in ITC v HMRC (n 5) [37].

105 Menelaou (n 5) [27].

106 ibid [28]–[29].

107 Stevens, ‘The Unjust Enrichment Disaster’ (n 14) 599.

108 Menelaou (n 5) [73].

109 ibid [65]–[68]; see also Lowick Rose (n 5); Burrows, ‘At the Expense of the Claimant’ (n 42) 180.

110 Burrows, ‘At the Expense of the Claimant’ (n 42) 180.

111 Stephen Watterson, ‘Subrogation as a Remedy for Unjust Enrichment in the Supreme Court’ (2016) 75 Cambridge Law Journal 219.

112 Tatiana Cutts, ‘Modern Money Had and Received’ (2018) 38 Oxford Journal of Legal Studies 1, 23.

113 ITC v HMRC (n 5) [65].

114 Menelaou (n 5) [140].

115 [1999] 1 AC 221 (UKHL).

116 ibid 227.

117 Menelaou (n 5).

118 William Day, ‘“At the Expense of” in Unjust Enrichment: Causal, Direct or Intentional Transfers of Value?’ [2017] Lloyd’s Maritime and Commercial Law Quarterly 588, 600; this is also the position in Germany where there would here be no performance claim. See Heinrich Siber, Schuldrecht (F Meiner Verlag 1931) 421–22; the decision has been doubted by Bofinger v Kingsway Group [2009] HCA 44 (High Court of Australia).

119 Stevens, ‘The Unjust Enrichment Disaster’ (n 14) 593.

120 ITC v HMRC (n 5) [62].

121 Lowick Rose (n 5).

122 Burrows, The Law of Restitution (n 6) 172–73.

123 Birks (n 66) 158.

124 [1909] SC 99 (Scottish Court of Session).

125 J Knobe, ‘Intentional Action and Side Effects in Ordinary Language’ (2003) 63 Analysis 190.

126 Lowick Rose (n 5) [58].

127 ibid [68].

128 ibid [89].

129 Cutts’ suggested distinction—Cutts, ‘Modern Money Had and Received’ (n 112) 24; see also Burrows, ‘At the Expense of the Claimant’ (n 42) 181.

130 Prudential Assurance Co (n 5).

131 [2007] UKHL 34.

132 ibid [72].

133 [2013] EWCA Civ 1415.

134 ibid [45].

135 ibid [55].

136 Burrows, ‘At the Expense of the Claimant’ (n 42) 177–78.

137 ITC v HMRC (n 5) [56]–[57]; see also Lowick Rose (n 5) [63] (Lord Mance); Burrows, ‘At the Expense of the Claimant’ (n 42) 177–80.

138 Nair (n 53) para 6.35.

139 Cutts, ‘Dummy Asset Tracing’ (n 57) 161–62.

140 Mitchell, Mitchell and Watterson (n 4) paras 6.66–6.70.

141 [2016] EWHC 898 (Ch).

142 ibid [24]–[32]; see also Dominic O’Sullivan, Steven Elliott and Rafal Zakrzewski, The Law of Rescission (2nd edn, Oxford University Press 2014) paras 21.04–21.05.

143 Bainbridge (n 141) [24]–[32]; Load v Green (1846) 15 M & W 216 (UK Court of Exchequer).

144 O’Sullivan, Elliott and Zakrzewski (n 142) paras 21.08–21.21.

145 ITC v HMRC (n 5) [48]; CMOC Sales and Marketing v Persons Unknown [2018] EWHC 2230 (Comm) [146].

146 O’Sullivan, Elliott and Zakrzewski (n 142) at para 21.29 describe it as simply a sui generis application of the nemo dat principle. The original right in the hands of the original transferee was defeasible and that is all the second transferee can get.

147 [2003] EWHC 1637 (Ch).

148 Bainbridge (n 141) [30]; NCA v Robb [2014] EWHC 4384 (Ch); Gladstone v Hadwen (1813) 1 M&S 517, 105 ER 193; Beverley v Pearce [2013] EWHC 2627 (Ch).

149 O’Sullivan, Elliott and Zakrzewski (n 142) para 16.11.

150 Shalson (n 147).

151 Nair (n 53) paras 7.27–7.28.

152 Mitchell, Mitchell and Watterson (n 4) paras 7.07–7.08.

153 Relfo (EWCA) (n 87).

154 Relfo (EWHC) (n 89) [59]; ITC v HMRC (n 5) [48].

155 Relfo (EWCA) (n 87) [110].

156 Mitchell, Mitchell and Watterson (n 4) para 6.39.

157 ibid para 6.41.

158 ibid para 6.39.

159 Relfo (EWCA) (n 87) [103] (Gloster LJ), [115] (Floyd LJ); See CMOC Sales and Marketing (n 145) [147]–[151].

160 Relfo (EWHC) (n 89) [88].

161 ibid [77]; Relfo (EWCA) (n 87) [56]–[63] (Arden LJ).

162 Nair (n 53) para 4.33.

163 Cutts, ‘Dummy Asset Tracing’ (n 57) 161–62.

164 [2015] UKPC 35 (UK Privy Council).

165 ibid [34]–[40] (Lord Toulson).

166 Duncan Sheehan, ‘Property in a Fund, Tracing and Unjust Enrichment’ (2010) 4 Journal of Equity 225, 238.

167 Charlie Webb, Reason and Restitution: A Theory of Unjust Enrichment (Oxford University Press 2016) 98–99.

168 Mitchell, Mitchell and Watterson (n 4) para 7.31.

Additional information

Notes on contributors

Duncan Sheehan

Duncan Sheehan, is a Professor of Business Law at the University of Leeds.