Unjustified Enrichment Revision Notes PDF

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Course summaries for the purpose of exam preparation. Includes all relevant case summaries and principles....

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Unjustified Enrichment Revision -

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The defender must be enriched in some way. This enrichment can take a variety of different forms, the most common is a sum of money but it can also include an object or a provision of service. These are all examples of positive enrichment where the defender gains something from the pursuer. There is also negative enrichment when the defender saved an expense he would have otherwise incurred for example the release of a debt owed. Any benefit that is retained by the defender without a legal basis is in principle recoverable. Unjustified enrichment occurs only in circumstances where ownership has been transferred.

History - Roman law never recognised a body of law called unjustified enrichment merely as number of remedies such as condictio indebiti and condictio causa data causa non secuta. These obligations were found within the much more general classification of quasi-contract. - Unjustified enrichment in Scots law has only been recognised in the past 30 years as a unitary body of law. - Falls under the Roman law of obligations concerning claims in personam. Responses - Restitution: concerns the recovery of the precise thing the defender received unjustifiably and at the expense of the pursuer e.g. the horse or an exact sum of money - Recompense: concerns the recovery of benefits that are ‘uncertain’ in content. This concerns situations where the defender is not capable of exact restoration. This usually means the court has to evaluate the sum to be paid e.g. performance of services or a cow that is sold and then eaten. - Whatever remedy is used the measure of recovery is the same – in quantum lucratus – the extent of the enrichment that the defender retains at the expense of the pursuer at the time that the first claim is raised.

Condictio – Deliberately Conferred Enrichment Cases -

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Condictio occurs when the pursuer has deliberately conferred a benefit on the defender and he receives the benefit but thereafter the transaction fails, most commonly because of an error as to liability. The purpose of the parties in making and receiving the conferral must have been to discharge a legally recognised duty (solvendi causa) The condictio claims are the most commonly occurring and their context is often commercial. They are regarded as the primary enrichment claims for these reasons.

Condictio Indebiti

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The purpose for which the conferral was made must have failed. The duty the parties intended to discharge must have been undue (indebtitum). The pursuer must normally have been in error in his belief as to the existence of the duty when he made the performance. He must have acted in error as to legal liability. The onus of proof is on the pursuer.

Retention without a legal basis Discharge of Duty - Condictio indebiti normally involves recovering benefits that the pursuer thought he was legally obliged to discharge. P pays D because if he doesn’t he could be taken to court to enforce payment of the debt. - The legal basis for retaining something is the discharge of duty. If A discharges money to B, B has the basis of retention on the grounds that A has discharged it. - Without a discharge there is no basis for retention by the defender of what is received and the defender is therefore obliged to restore the benefit or its value. - Agnew v Ferguson – per Lord Trayner – simple case of condictio indebiti – money paid that is not due and the receiver has no moral or legal title to retain. Paid too much money as he had not deducted his income tax, was allowed to recover. - The duty must be legally recognised so an illegal act would not be able to be reclaimed under unjustified enrichment. Despite this it does not need to be a duty that the pursuer was bound in law to discharge. Moral and Natural Obligations - There are some duties that provide retention for legal basis even though they are not enforceable in law. These include natural duties. - E.g. a debt of honour such as a gambling debt that is not enforceable in law can be retained if paid; someone who is bankrupt is only entitled to pay a percentage of his debt in view of the sequestrian but he cannot recover what he pays if he pays the full amount after the end of the sequestration. - If a pursuer acts to discharge a natural obligation and discharge fails, the benefit will be recoverable e.g. he pays the wrong person or pays too much. - Moore’s Executors v McDermid – An agreement was concluded between debtor (McDermid) and his creditors that he should be discharged of paying a certain proportion of his debts. All the defenders agreed with the exception of one who insisted on full payment of the debt. On M’s death the expressed wish that the debt should be paid in full was given effect by the executors. By an oversight the defender was paid a second time. The payments made to the creditors were made in fulfilment of a natural obligation to them. There was no natural obligation owed to have the payment doubled, so the second payment was recoverable. - County Properties and Developments Ltd v Harper – a casino gave out too many chips. The receiver did not count them and went onto spend them. Judged this was unrecoverable under condictio indebiti. Proof of undue - The burden of proving the performance was undue lies with the pursuer.

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Balfour Melville v Duncan Morgan Guaranty Trust Company of New York v Lothian Regional Council The pursuer must have been in error in the belief of the existence of the duty. Performances made in knowledge are generally construed as gifts and are unrecoverable. McIvor v Roy – A branch manager of an insurance company paid out to the daughter-in-law of the deceased policyholder the proceeds of the policy. She was not entitled to it and he had to pay out the said sum again to the son of the deceased. The manager tried to claim back the sum from the daughterin-law under condictio indebiti but was unable to as it was held the payment had not been made under error. A person who know at one time, but not the time of payment, that discharge would not result from performance – is not barred from recovery. Kelly v Solari – Money paid by the plaintiff to the defendant under a bona fide forgetfulness of facts may be recovered. (see p23?) Balfour Melville v Duncan Error as to motive is insufficient e.g. P pays 100 because in error he thinks D will like him better

Proof of Error - Erskine 111, 3, 54 talks about the effect of knowledge on condictio indebiti. He says if he who made the payment knew at the time that no debt was due that condictio indebiti is not competent. If one gives what he is not due he is gifting someone, for condictio indebiti there must be error. - Carrick v Carse - When payment is made sine causa, it will be presumed to have proceeded by error, and not donation. - Error is on balance a positive requirement shown in the obiter dictum of Lord President Hope in Morgan Guaranty Trust Co of New York v Lothian Regional Council: An averment that the payment was made through error is needed in order to show that this is not a case of donation. It is appropriate to place the onus of proof on the pursuer, as he can best explain why the payment is not due. Error must be Excusable? - Some authority in Scots law thinks condictio indebiti will be excluded if the error as to the existence of the debt was inexcusable i.e. if a payment was made negligently or grossly negligently -

Glasgow Corporation v Lord Advocate

Circumstances where condictio indebiti applies 1) Over-payment or Performance Beyond what was due -

Magistrates of Dunbar v Kelly – a pursuer who paid a tax that was not authorised by statute or usage recovered what was paid. Peter Walker and Sons (Edinburgh) Ltd v Leith Glazing Co Ltd – under a contract between a principal contractor and a sub-contractor, a sum paid in respect of repairs was recovered as it had not been authorised.

2) A Debt or Duty is paid by a person who erroneously thinks that he is the debtor - Credit Lyonnais v George Stevenson and Co – money was recovered which was wrongly credited to the defender’s account due to the similarity of their name with the true creditor. 3) Payment of Debt Subject to Suspensive Conditions - The condition makes the existence of the debt subject to future even which might never happen. If the condition had not been satisfied at the time of raising the action no enforceable debt exists and the money can be recovered. - Recovery will be denied if the condition has been satisfied by the time the action is raised. The debt in this case exists and has become enforceable according to Bankton I 8. 4) Obligations Postponed to a certain day - The payment of a debt is postponed until a future event which is certain to occur takes place e.g. death or turning 18. 5) Discharge of a Duty in Respect of which a pursuer

defence was available to the

Condictio sine causa -

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Claim to recover what is retained without a legal basis. ‘Retention without legal basis’ is selected by Stair as the unifying principle of the condictio in Scots law. The principle was recognised as the foundation of the condictiones in Scots law by the House of Lords in Cantiere and this was reaffirmed by the Court of Session in Shilliday v Smith. Essential requirements of the claim: 1. Deliberate conferral 2. The purpose of parties in making and receiving the conferral must have been identical with that which underlies a cause of action like condictio indebiti or that is sufficiently similar 3. The purpose of which the conferral was made must have failed 4. The conferral will have been undue with the result that discharge of a legally recognised duty failed 5. The reason why the transaction failed will most commonly be because P’s intention was vitiated. The vitiating factors may be that one is i) directly equivalent but different from that which arises under a nominate claim like condictio indebiti; for example an undue performance is made under compulsion and not under error as to legal liability as in indebiti; or P’s intention is vitiated in a manner that is sufficiently similar to a nominate claim like indebiti to prevent the creation of a legal basis for D to retain what he received. For example when acting to create a gift P was sufficiently in error as to an essential

fact on which the gift was being constituted as to prevent the creation of a valid gift. 6. The whole circumstances of the case are such that it is equitable to compel defenders to redress the unjustified enrichment. Applications of the General Principle - The Pursuer made an undue conferral that would normally have been regulated by condictio indebiti but there was some other vitiating factor like compulsion, extortion and not under error as to legal liability. Shown in Arrol v Montgomery - The Pursuer made an undue conferral that would normally have been regulated by condictio indebiti with the difference that the performance was made in doubt, not under error as to legal liability. - The pursuers purpose was to create a gift that failed. This often happens when the gift is given by someone acting on behalf of the donor. Finlay v Monro – Mr Finlay attempted to send an ox to a friend, the delivery boy forgot the name of the friend and instead delivered it to Monro who’s wife received it and had it cooked. Munro had to pay for the price of the ox under unjustified enrichment.

Condictio Causa Data Causa Non Secuta -

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There must have been a deliberate conferral of a benefit by P to D (standard condictio) This must occur for a future lawful purpose outwith contract that failed A benefit was conferred one or both parties to a contract that was later frustrated Connelly v Simpson per Lord Sutherland - condictio causa data is a ‘claim to recover what was given for an agreed lawful future purpose outwith contract which failed.’ Facts: when you enter into a contract you take over certain risks. Private law allocates those risks associated with that choice to enter the contract to you. Every individual is a free agent and can do what they like – choose who they want to contract with. Connelly paid £16,000 for shares in a private company for someone who used to be a friend, the company then went bankrupt, at the time the shares were bought Mr C was going through a divorce did not get a certificate as he did not want his wife to know. Claim in unjustified enrichment for £16,000 worth of shares that are now worth £400. Reallocation of risk – does not work. Was a contract breach – condictio claim was not valid. Shilliday v Smith per Lord President Rodger defined condictio in the following terms: ‘Where A is enriched because B has paid him money or transferred property to him in the expectation of receiving consideration but A provides no consideration… also… where B paid the money or transferred property to A on a particular basis which fails to materialise e.g. in contemplation of a marriage that does not take place.’

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Condictio c.d. is used when something is given for a consideration that fails in cases of frustration of contract.

Cause - Stair I,7,7 applies the condictio c.d. to cases where ownership of a thing has been acquired without any agreement for its return but the cause on which the thing was received has failed. - Where a thing has been handed over in contemplation of marriage, Stair says the cause is the marriage. Condictio causa data circumstances 1) Performance made on the understanding that what is received will be put to a particular use - Stair suggests that there are many instances where condictio c.d. applies but he identifies only one. He says (1,7,7) that things given in contemplation of marriage (the cause) are recoverable if the marriage does not take place. - Shilliday v Smith – A couple lived together and got engaged. Smith bought a house, which the couple intended to repair and refurbish as their marital home. Shilliday spent considerable sums of her own money on materials for the house and gave Smith money for that purpose. They then separated and the marriage was called off. Shilliday raised an action for payment of the sums she had lost. The judge ruled in favour of Shilliday, Smith’s appeals failed. Judged that the condictio causa data causa not secuta was relevant as the payments were made in contemplation of marriage and the benefits to herself were incidental to that purpose. - Satchwell v McIntosh - Virdee v Stewart - Thomson v Mooney 2) Performance made on the understanding that what is received will be put to a particular use - e.g. Money given as a scholarship 3) Performance made in the Anticipation of Creating Obligations - Bankton I,8,21 ‘A bond given in hopes of getting the money which is not delivered may be removed’ 4) Purpose Outwith but Closely Associated with contract - If parties enter into a contract for agreed purposes can it be said that this purpose is also a ‘cause’ of the performance which renders what is transferred under the valid contract recoverable if it fails? - E.g. If P sells the land adjoining their properties to D to build a swimming pool that will be used by both families. If D fails to build the pool can P recover the land? - Knowledge and Behaviour contrary to good faith are special defences against claim to recover on the grounds that the cause has failed.

The condictio c.d. lies to recover what was performed under a contract for a consideration that failed due to frustration. A frustrated contract still exists but it suspends further performance. Coronation cases e.g. Chandler v Webster – plantiff hired out a room to watch the coronation procession. This became impossible due to the King being ill. Frustration of contract. The plantiff still had to pay the money for the hiring of the room. This case could be solved by a claim in condictio causa data causa non secuta. Cantiere San Rocco v Clyde Shipbuilding and Engineering Co –a contract between a Scottish and an Austrian shipbuilding company was frustrated when the two countries went to war. The Austrian company tried to claim their money back, the Scottish company claimed that the war was neither of the parties fault. Judged that they were entitled to their money back as owing to the war performance was impossible. Lord Dunedin said that the remedy was given not because of the contract but because of the condictio causa data doctrine. The result of Cantiere was that the relationship of parties to a valid, albeit frustrated, contract is regulated by the law of unjustified enrichment. This raises questions as it could be argued that one party is not enriched in any way.

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