This segment willdiscuss the development of the principle of unjust enrichment within the UKlegal system, the challenges faced by the courts in its application, the corrective measures taken to address the challenges andthe current position of the Law.
The principle ofunjust enrichment first appeared in English law under an action for indebitatus assumpsit (to have undertaken adebt). However, it took over two centuries before it was formallyrecognised by the House of Lords in LipkinGorman (a firm) v Karpnale Ltd. Though legally recognised, the principlesas its concept was not instantly acceptable because it relates to only four forms actions, namely money hadand received for the defendant’s use ,money paid to the defendant, quantumvalebat – to recover the reasonable value of goods and quantum meruit – to recoverreasonable value of services ; and it contradicts the established oldcommon law principle of express contract (OxfordUniversity Press (2016) Equity, Trusts & Land Law (compiled for The OpenUniversity), Oxford, Oxford University Press). The principle’sreliance on implied contract as means of assessing restitutionary claim constitutea major impediment to its acceptance and application in the UK.
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It follows thata claim will not suffice where there was an express contract and one of theparties does not have the capacity to contract or would prevent the contract from being implied. The implied contractapproach by the principle of unjust enrichment in assessing restitutionary claimwas rejected by the House of Lords in WestdeutscheLandesbank Girocentrale v Islington LBC. However, the Court of Appeal in Haugesund Kommune v Depfa ACS Bank, itwas held that though it was not possible to imply a contract due to lack ofcontractual capacity, the claimant could sue the defendant on an impliedcontract (see also Taylor v Bhail). Itwas this rejection of the implied approach to restitutionary claim that helpscement the position of the principle in English law. Lord Wright in Fibrosa Spolka Akcyjna v Fairbairn LawsonCombe Barbour Ltd noted that ” it isclear that any civilised system of law is bound to provide remedies for casesof what has been called unjust enrichment or unjust benefits, that is toprevent a man from retaining the money of or some benefit derived from anotherwhich it is against conscience that he should keep. Such remedies in Englishlaw are generically different from remedies in contract or tort, and are nowrecognised to fall within a third category of the common law which has beencalled quasi-contract of restitution”. Theapplication of the principle has also been a major subject of controversy overthe years, The House of Lordsin Sempra Metals Ltd v Inland RevenueCommission, while relying on the principle of unjust enrichment, allowed aclaim for compound interest on moneypaid to an innocent defender under a mistake.
The unanimous decision relies onthe principle of unjust enrichment, but the analysis varies. The majoritydecision viewed the claim as commensurate to the value of the benefit receivedwhile the minorities are of the view that the claim of compound interest shouldonly be successful where the claimant could establish that there are certaingains accrued to the defendant.Critics faultsthis line of argument in the application of the principle because it makes thelaw unclear, unpredictable and ambiguous. Also, there are situations where thecourts disagree or failed to apply the principles in cases where it should beor have not categorically distinguished the difference between unjustenrichment and equity (Blue HavenEnterprise v Tully 2006 UKPC 17). To make theapplication of principle more clearer and less ambiguous, the courts established two functions of the principle ofunjust enrichment, namely the formulaic and the normative functions. Under theformulaic function, a restitutionary relief may granted to the claimant if thedefendant has unjustly enriched himself/herself and such relief have beengranted in previous circumstances. The formative function is based on thediscretion of the court. The judge determines whether the enrichment claim wasunjust, based on the facts of the case without reference to previous similarcases.
This progressiveapproach has now been developed by the courts to deal with the predictabilityand ambiguity of the application of the principles.Inmodern application, establishing a claim in unjust enrichment requires theclaimant, who alleges that the defendant has enriched himself or herself at theexpense of the claimant, to proof the elements of unjust enrichment and thusone of the grounds on restitutionary relief applies. The burden of proof nomove to the defendant who must rebuff the allegation in defence, either to statethat there is a legal basis for the receipt of the enrichment as there is nolegal basis for the enrichment or the defendant’s position has changed afterthe receipt of the enrichmentItis now easy to identify claims of unjust enrichment in court.
The claimants arerequired to plead reference to unjust enrichment principle for a successfulapplication. The category related to the claim must be identified as theprinciple have different causes of action that should be identified with therespective claim. The claim must also be consistent with the grounds that couldactivate the restitutionary remedies. The claim must also identify the type ofwrongdoing that is alleged against the defendant, for example, where the claimis founded on the vindication of property rights, ”it is necessary to identify the rights claimant seeks to vindicate andsometimes to formulate the claim with some precision…” (OxfordUniversity Press (2016) Equity, Trusts & Land Law (compiled for The OpenUniversity), Oxford, Oxford University Press).The creationof the law of unjust enrichment is one of the most noble legal principlesdeveloped around the private law in the UK legal system. Though its developmentand application were ambiguous, and it encounters strong criticisms over the years,it now operates as a body of law with its own rules that are generally acceptedand no more a rejected concept.
The application of the principle is consistent;clearer and distinct from the law of obligation.