Uren v First National Home Finance Ltd [2005] EWHC 2529 (Ch)

[2005] EWHC 2529 (Ch)Case No CH/2005/PTA/01118
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 10/11/2005
Before
MR JUSTICE MANN
Between
CHARLES URENClaimant/FIRST NATIONAL HOME FINANCE LIMITEDDefendant/
MR. D. MATTHIAS (instructed by Messrs. Follett Stock) for Claimant/Respondent.MR. W. HIBBERT (instructed by Eversheds LLP) for Defendant/Appellant.Hearing Hearing date: 8 th November 2005
JudgmentMr Justice Mann :
[1]This is an appeal from District Judge Mitchell sitting in the Truro District Registry. By a decision dated 10th February 2005 (resulting in a sealed order dated 19th February 2005), the District Judge declined to strike out the claim in this matter, and declined to give the defendant summary judgment, the defendant having claimed summary judgment on the basis that the claim had no reasonable prospects of success. This appeal is brought with the permission of Blackburne J.

Facts

[2]Mr Uren is one of many intending purchasers in a development of flats in Tenerife known as Santa Barbara. The development was being carried out at the end of the 1980s and into the 1990s. It was carried out by a company called Arrish Limited, a Manx company. Mr Uren agreed to acquire two flats, and he paid £50,000 (in various instalments) to Arrish as part payment of the purchase price. A company in the same group as the defendant lent monies to Arrish for the purposes of the development, and there were many other purchasers. In July 1990 the lending bank appointed receivers. By way of enforcement of the security, there was a Spanish judicial auction. Because of the nature of this application, I am invited to assume that the facts relied upon in the particulars of claim and further information provided by Mr Uren are true. Those assumed facts include a short description of the relevant auction process. Apparently there are three stages, each designed to obtain the best price reasonably practical in the circumstances. The first auction is at a reserve price equivalent to the lender’s principal sum; the second is at a reserve of 25% of the original price; and the third is apparently an auction with no reserve at which the property is simply sold to the highest bidder. This procedure was invoked and it went as far as the third auction. At the third auction the development property was purchased by another Manx company called Pitchcott Limited (“Pitchcott”), a company owned and controlled by the First National group of which the defendant is part.[3]The intending purchasers formed an action group, and contributed various sums to that group. Mr Uren himself contributed £75,000 being the amount of the balance of the purchase price due on his flat. Over £1.5m was raised. The purpose of the action group was to procure that the development got finished. The defendant is alleged to have encouraged the purchasers’ association in this endeavour and to have indicated that it would make funding available to enable the purchasers to complete the development. Until that completion happened Mr Uren (and, I assume, the other purchasers) had no interest in the development itself. All they had done was provide money which, to a greater or lesser extent, had been used to acquire and carry out the development. In 1992 this action group came to an arrangement with the First National Group, using its fighting fund of £1.54m. This money (or rather the bulk of it) was made available to a new company (incorporated in England) known as Santa Barbara Limited, which was intended to be a vehicle for completing the development. That company purchased the shares in Pitchcott at a price of £100, and the development site remained in Pitchcott’s ownership. A debt of some £3.6m was owed by Pitchcott to the First National company concerned (presumably money advanced to enable Pitchcott to buy the development from Arrish), and Santa Barbara Limited discharged this debt using about £1m of its own resources (that is to say the fighting fund) and a sum of £2.5m borrowed from a bank in the First National Group, in respect of which that lender took a first charge on the development site, a guarantee from Santa Barbara Limited and a debenture from the latter company to secure the liability under the guarantee. There was therefore a refinancing exercise. Santa Barbara Limited also obtained, through Pitchcott, a further £2.5m development facility from the defendant to enable the development to be completed, that sum to be drawn down in stages. Monies beyond that were lent from time to time over the following years.[4]The particulars of claim do not strictly distinguish which company in the First National group entered into which part of the relevant transactions. It implicitly proceeds on the assumption that they should all be treated as one for these purposes. No point on that was taken by the defendant in the appeal before me, and I shall proceed on the same basis. The particulars of claim complain that as time went on the defendant exercised an improper control over the development by failing to comply with the drawdown provisions under the agreed facilities, so that unnecessary and improper difficulties were caused to the carrying out of the development. It is alleged that not only were these activities a breach of contract; they were in bad faith and it seems to be said that the defendant planned to take over the development. There was obviously a degree of acrimony, with demands submitted by the defendant and refused by Santa Barbara Limited, culminating in a demand for the outstanding sum of £6.69m on 14th March 1996 and the appointment of receivers to Pitchcott and Santa Barbara Limited the next day (15th March 1996).[5]At this point history began to repeat itself. There was another judicial auction, and again the property was bought by a company controlled by (in essence being part of) the First National Group, namely Agosta 96. The purchase price was, apparently, rather less than the sums due and outstanding to the defendant bank. In a press release issued on the same day that the receivers were appointed, the defendant had said that it proposed to safeguard the interests of the purchasers of the flats, and it appears that in the next two years there were some negotiations with intending purchasers of the development (outside the defendant’s group) which had built in a degree of preservation of the purchaser’s rights (if that is what they had) to their apartments. However, for reasons that do not currently appear, those deals were not done. Instead, there was apparently a deal with another company, experienced in timeshare operations, known as LSI. That deal (it is assumed for present purposes) had two elements. The first was a sale at £7m. That would be enough to repay the outstanding indebtedness. The second is said to arise on a collateral contract (not apparently documented, but which I am invited to assume for present purposes to exist) to the effect that LSI would introduce business to the defendant worth about £1m a year for the following 3 to 5 years. This arrangement seems to me to be rather vague, but, bearing in mind the nature of the application before me, and the stance of the parties, I am to assume that there was such an arrangement.

The Claim

[6]The claim form was issued on 28th May 2004. That becomes important in the context of a limitation defence. The claim is based in “unjust enrichment”. The particulars or claim sets out the story to which I have referred, and makes an express allegation that an officer of the defendant bank “unlawfully outside the terms of the facility letter….so abused the defendant bank’s powers to control the draw down procedure in respect of the Development Facility as to cause repeated crises in the development works….”. That allegation is repeated in paragraph 12 in respect of a later period, referring to a “strategy of unlawfully abusing its powers to control the draw down procedure”. The “strategy” is said to have “culminated” in a letter indicating that the bank intended to exercise its powers to call in the loan, which it duly did. Paragraph 14 alleges that the construction work had been “substantially completed by Santa Barbara Limited/Pitchcott with the aid of considerable financial input from the purchasers….”. Paragraph 15 alleges that:
“The bank’s conduct and the conduct of its lawyers was completely unmeritorious and flagrantly in bad faith. Without doubt, in hindsight, the bank had set its mind to take over the resort, come what may, and had set its lawyers about that task.”
There is then a pleading of the receivership. Paragraph 18 reads:
“In the premises, the defendant bank having taken control of the development site unlawfully and in bad faith, was arranging to dispose of the site (through Agosta 96 to LSI) and to enrich itself significantly through loan business that LSI guaranteed to introduce as part of the deal. The purchasers were to be left without any protection by the deal.”
Paragraph 20 alleges that the claimant (along with the other purchasers) had lost his apartments and all the money that he had already paid, whereas the defendant bank not only had recovered what was owing by Santa Barbara Limited/Pitchcott through the sale of the development site to LSI (through Agosta 96), but was also going to derive the other substantial profits referred to. Paragraph 21 pleads:
“The defendant bank has accordingly been enriched at the expense of inter alia the claimant in such circumstances that the law in accordance with the principles of restitution would consider to be unjust”
. And paragraph 22 reads:
“The claimant is entitled as against the defendant bank to the restitution of what he has lost by reason of the defendant bank unjustly enriching itself at his expense – namely, his investment in the development (£150,000) and the capital appreciation in the value of the apartments that he intended to purchase.”
The reference to £150,000 is not actually relied on; the claim is in fact his £125,000 that he introduced as referred to above.[7]The claim is amplified by further information provided pursuant to a request made after Blackburne J had given permission to appeal, and doubtless because he suggested that such a request be made in order to deal with some uncertainties in the pleaded claim. The following significant points emerge from the further information of the claim provided by Mr Uren:(a) Mr Uren advances no positive case to the effect that putting Arrish Limited into receivership was in any way unjustified.(b) Mr Uren advances no positive case to the effect that putting Arrish Limited into receivership forms part of Mr Uren’s claim that any enrichment of the bank was unjust.(c) The claimant was asked whether it was alleged that there was anything unlawful or otherwise improper in Pitchcott purchasing the site at auction, and whether or not that purchase formed any part of the claim that the enrichment of the defendant was unjust. In response to that, it was averred that the behaviour of “the First National group of companies following Arrish Limited being placed into receivership comprises part of the conduct that makes the defendant bank’s enrichment at the claimant’s expense an unjust enrichment”. A complaint was made that using an “anonymous private company” in fact controlled by the First National group to purchase the development site was alleged by the bank to have “the effect of clearing the title to the property for the benefit of the purchase at the auction” (words used by the bank) “and of divesting the claimant of any rights to his two apartments or to the monies that he had invested in them”. It was said that this was replicated when the defendant bank put Santa Barbara Limited into receivership and another “anonymous private company” (Agosta 96) purchased the site by way of the Spanish auction procedure. Request 11 deals with the question of how it is that the claimant alleges that any enrichment of the defendant has been “at the expense of the claimant”, so as to “create sufficient nexus as to support a claim of unjust enrichment”. The reply alleged that by reason of the £50,000 paid to Arrish Limited and the £75,000 paid into the fighting fund “The claimant….invested a considerable amount of his own money into the development. The defendant seeks to identify these payments as two separate transactions in which the payments were in effect ‘lost’ when first Arrish Limited and then later Santa Barbara Limited/Pitchcott went into receivership. However, what that interpretation ignores is that the payments by the claimant….were made in order that [he] should acquire apartments at the development, and resulted directly in significant progress in the construction of the development…As a direct result of the payments made by the claimant and his fellow purchasers, in 1996 the defendant took possession of a development in which a very substantial amount of the planned construction work had been completed… In other words the value derived from the payments made by the claimant were not lost when Arrish Limited and Santa Barbara Limited went into receivership, but endured in the enhanced value of the development. When the sale of the development by the defendant to LSI in 1998 was complete, the claimant’s entire investment was lost… The enrichment of the defendant, in the form of profits from business introduced by LSI, was founded upon the ability of the defendant, through Agosta 96, to put an attractive and valuable development up for sale. The development had been built using the investments of the claimant (and his fellow purchasers). Given that the sale of the development to LSI deprived the claimant of his apartments and all the funds that he had invested, the defendant’s enrichment was plainly at the expense of the claimant (and his fellow purchasers)”. Elsewhere in the further information, the claimant makes it clear that he was not claiming to have any proprietary interest in the land.(d) Request 18 asks for particulars of all facts and matters relied on in support of the allegation that the enrichment of the bank was unjust. In response the claimant alleges that the bank wanted to get more out of its involvement with Santa Barbara Limited than merely the interest and capital due. In July 1994 there was an agreement between a First National group company and Pitchcott which contained provisions allowing the defendant a share in the profits once a certain number of apartments had been sold, in return for which the defendant would allow purchasers to acquire title to their apartments. It is alleged that the defendant “reneged” on that agreement. There is then a complaint about obstructing the draw down process, followed by an allegation that “therefore the decision to call in the loans [in 1996] was unreasonable, unnecessary and unjustifiable”. There is then an allegation that “the defendant’s enrichment was unjust because in bad faith it contrived to ensure that the purchasers acquired no security in the apartments that they had agreed to buy, engineered the receivership, and then arranged for the sale of the development in order to enrich itself with complete disregard for the purchasers who had invested so much in the development and who lost everything by reason of that sale”.[8]For present purposes it is sufficient to note the following general structure of the claim:(a) It is a claim based on a complaint of unjust enrichment on the footing that a claim can be established by demonstrating that there has been enrichment at the expense of the claimant which can be seen to be unjust. There is no attempt in the pleading to put the claim into any of the familiar and developing descriptions of restitutionary claims which are usually deployed to formulate an unjust enrichment case – money received, subrogation, total failure of consideration and so on.(b) The enrichment relied on is not the taking of the development into the name of Agosta 96; nor is it the receipt of the direct proceeds of the sale by Agosta 96 from LSI (which was in about the equivalent of the outstanding debt). It is in the collateral deal with LSI, which is said to have been worth £3m to £5m.(c) That enrichment is not said to have arisen in a direct fashion, by reason of the receipt of monies from the claimant, but by reason of the claimant’s money having gone into the development, which gave the defendant bank something to sell, and as part of that sale arrangement this extra money (enriching money) was produced.(d) No complaint is made about the appointment of receivers to Arrish Limited itself. It is also not plain that the claimant relies on the sale to Pitchcott as being itself an unjust step, or that there was any abuse of the Spanish auction procedure in doing that. On a fair reading of the claimant’s claim, it seems to me that that was no more than background; though it is certainly true that the next time the procedure was invoked it was said to be in circumstances that were unjust.

The Attacks on the Claim

[9]For the purposes of this application to strike out and for summary judgment, the defendant takes two principal points. First, it says that the claim does not itself disclose a proper cause of action. This itself can be broken down into two principal lines of attack. First, there is no such thing as a claim of “unjust enrichment”. Unjust enrichment is merely the principle underlying a number of other bases of claim, and none of those other bases has been pleaded. The second is that even if that is wrong, there is no proper pleading or allegation of an enrichment which can be said to be at the expense of the claimant. Assuming for these purposes that the defendant has been enriched, and even assuming that factors exist which might give rise to complaints of injustice, there is no sufficient nexus between the claimant’s money and the defendant’s enrichment.[10]The second principal line of attack on the claim is that it is statute barred. It is said that if there was an arguable unjust enrichment claim, that enrichment came when the development was acquired by Agosta 96, and that is more than six years before the issue of these proceedings. The response of the claimant to that is that the enrichment did not occur until the sale to LSI, and that occurred within six years of the commencement of these proceedings.

The Judgment Below

[11]The judgment below set out the background in general terms. The district judge set out the test to be applied – that the court needed to be satisfied that there was “no real prospect of this claim succeeding and that there is no other reason why the claim should proceed to a trial” if it was to grant summary judgment or strike out. No complaint is made about that test. The district judge then went on to consider the issues that I have identified above (in a slightly different order). District Judge Mitchell first found that it was now arguable that “a claim for unjust enrichment can stand on its own feet”; that is to say one did not have to bring the claim within some other sub-category of principle. He reached this decision having considered various passages in Banque Financière de la Cité v Parc (Battersea Ltd) [1999] 1AC 221, Woolwich Equitable Building Society v Inland Revenue Commissioners 1993 AC70, Orakpo v Mansen Investments [1978] AC95 and an unreported case called Brennan v Brighton Borough Council (CA 7th May 1997). This latter case was relied on as being a situation in which a restitutionary remedy was held to be arguable in a situation with some of the elements of the present case, that is to say it was based on a situation where an individual had contributed funds used on land and by a company, and where the company had been let down by a contractual counterparty. The individual was held to have an arguable claim in restitution. Having concluded that, the district judge then went on to consider whether the necessary elements to establish unjust enrichment were present. He set out three essential elements:
“(i) that the defendant has been enriched by a benefit; (ii) that the benefit must have been gained at the claimant’s expense – in effect the nexus issue; (iii) that the benefit must have been gained in circumstances where it would be unjust to allow the defendant to retain it.”
He observed that for the purposes of the application the defendant was not contesting the issue of whether it had been enriched, and concluded that if the enrichment could properly be regarded as being at the expense of the claimant, then in the district judge’s view it was well arguable that such enrichment was unjust, particularly having regard to the alleged conduct of the defendant which, he noted, was for those purposes not contested. The principal argument therefore concerned nexus. The district

judge indicated that again he got considerable assistance from the Brennan case and concluded:

“Whilst the immediacy of the relationship between the claimant and the defendant in Brennan is lacking in this instance, albeit the defendant well knew of the existence of the investors and the lengths that they had gone to secure their investments, in other ways the position in this instant case could be said to be stronger than in Brennan, for example the claimant’s apparent intention to invest in acquiring named apartments rather than in a corporate structure. In my judgment, this is a case very much on the ‘cusp’. After due consideration and having regard to the assumed facts and the totality of the matters identified, I do not consider that the claimant has no real prospect to success [sic] in establishing nexus. This conclusion applies to both the claimant’s investments pre-Pitchcott as well as post. In coming to this conclusion, I do not underestimate the hurdles that the claimant will face at trial, but I conclude that this is not a plain and obvious case where the claimant should not be given the opportunity of attempting to surmount those hurdles.”
In relation to limitation, the district

judge set out shortly the competing arguments, and concluded:

“Certainly the claimant has a real prospect of succeeding on the argument that the time ran from the sale to LSI and from the point of view of the summary judgment application, the limitation issue does not operate so as to prevent the claim from proceeding.” (ii) that the benefit must have been gained at the claimant’s expense – in effect the nexus issue; (iii) that the benefit must have been gained in circumstances where it would be unjust to allow the defendant to retain it.”
He observed that for the purposes of the application the defendant was not contesting the issue of whether it had been enriched, and concluded that if the enrichment could properly be regarded as being at the expense of the claimant, then in the district judge’s view it was well arguable that such enrichment was unjust, particularly having regard to the alleged conduct of the defendant which, he noted, was for those purposes not contested. The principal argument therefore concerned nexus. The district

judge indicated that again he got considerable assistance from the Brennan case and concluded:

“Whilst the immediacy of the relationship between the claimant and the defendant in Brennan is lacking in this instance, albeit the defendant well knew of the existence of the investors and the lengths that they had gone to secure their investments, in other ways the position in this instant case could be said to be stronger than in Brennan, for example the claimant’s apparent intention to invest in acquiring named apartments rather than in a corporate structure. In my judgment, this is a case very much on the ‘cusp’. After due consideration and having regard to the assumed facts and the totality of the matters identified, I do not consider that the claimant has no real prospect to success [sic] in establishing nexus. This conclusion applies to both the claimant’s investments pre-Pitchcott as well as post. In coming to this conclusion, I do not underestimate the hurdles that the claimant will face at trial, but I conclude that this is not a plain and obvious case where the claimant should not be given the opportunity of attempting to surmount those hurdles.”

The Appeal Before Me

[12]At the appeal before me Mr Hibbert represented the defendant, and Mr Matthias (who was also counsel in the Brennan case) represented Mr Uren. The arguments before me were the same as those before the district judge, though I fancy that I was treated to more reference to authority than he was. The submissions to me went into some depth as to the nature of an unjust enrichment claim, delving into at least three academic works and a number of the leading authorities. In considering the questions which arise in this case, I have well in mind the fact that a summary judgment case, on which general facts are or may be assumed and detailed facts are not found, is not generally an appropriate forum for dealing with difficult or complex questions of law. I also accept the submission of Mr Matthias that unjust enrichment is a developing area of law, and again a summary judgment application on potentially complex facts, and especially when taking less than a day, is not an appropriate procedure for continuing (or curtailing) that development. However, it is also correct to say that a court cannot abrogate any responsibility for deciding questions on the footing of some generalised assertion that it is all very difficult and the law is developing; it is still appropriate to consider the particular case and to consider whether or not, despite the developing state of the law and despite the scope for future development and elaboration, nevertheless a claim (or defence) is sufficiently beyond the realms of possible development so as to enable the court to say that the claim (or defence) cannot succeed. That is what Mr Hibbert invites me to do in relation to the first limb of the unjust enrichment point.

Has a Proper Claim in Unjust Enrichment been pleaded?

[13]Mr Hibbert’s point in relation to this is that the authorities establish that unjust enrichment is not of itself a cause of action. It is merely the principle underlying a number of claims and used in order to formulate those claims and defences. One cannot simply plead a sequence of events and say, as a result of those events, a defendant has been unjustly enriched. He accepts that the law is in a state of development, but says that it has not developed that far, nor is it likely to do so. There is much to be said for Mr Hibbert’s view. The authorities start with the proposition of Lord Diplock in Orakpo v Manson Investments [1978] AC 95 at page 104C:
“My lords, there is no general doctrine of unjust enrichment recognised in English law. What it does is to provide specific remedies in particular cases of what might be classified as unjust enrichment in a legal system which is based upon the civil law.”
To the same effect is Lord Brown-Wilkinson in Woolwich Building Society v IRC [1993] AC70 at 196H:
“Although as yet there is in English law no general rule giving the plaintiff a right of recovery from a defendant who has been unjustly enriched at the plaintiff’s expense, the concept of unjust enrichment lies at the heart of all the individual instances in which the law does give a right of recovery.”
There are several similar statements in other leading modern authorities. The point has a corollary in the view of Lord Goff of Chieveley in Lipkin Gorman v Karpnale Ltd [1991] AC548 at page 578C:
“I accept that the solicitors’ claim in the present case is founded on the unjust enrichment of the club, and can only succeed if, in accordance with the principles of the law of restitution, the club was indeed unjustly enriched at the expense of the solicitors. The claim for money had and received is not, as I have previously mentioned, founded upon any wrong committed by the club against the solicitors, but it does not, in my opinion, follow that the court has carte blanche to reject the solicitors’ claim simply because it thinks it unfair or unjust in the circumstances to grant recovery. The recovery of money in restitution is not, as a general rule, a matter of discretion for the court. A claim to recover money at common law is made a matter of right; and even though the underlying principle of recovery is the principle of unjust enrichment, nevertheless where recovery is denied, it is denied on the basis of legal principle.”
If a defendant is not entitled to defend a claim by simply pointing out that recovery would be unjust, then it would seem to me to follow that a claimant cannot recover by simply establishing the converse. According to all these dicta, what the law requires is that the claimant should establish certain facts which the law, with a certain amount of categorisation (but not necessarily rigidly) regards as being factors which demonstrate that, in the eyes of the law, the defendant had indeed been unjustly enriched. It is open in every case for the defendant himself to rely on matters which, again in accordance with factors laid down by the law, demonstrate that in fact there is no unjust enrichment – for example, by establishing a change of position defence which falls within the rules pertaining to that defence. This approach is the approach adopted by Clarke J in South Tyneside Metropolitan Borough Council v Svenska International plc [1995]1 ER545 pp556-7. In that passage the learned

judge accepted the submissions of counsel that:

“There is no cause of action known as unjust enrichment and that the Council is entitled to recover the net payments it has made as money had and received by the bank.”
The judge then went on to analyse other cases on the footing that they fell within established categories of unjust enrichment, and at page 557B he considered what Dillon LJ had said in West Deutsche Landesbank Girozentrale v Islington London Borough Council [1994] 1 WLR 938at 946:
““It must follow in my judgment on the authorities referred to that West Deutsche is entitled to recover the balance of the £2.5m from Islington as money had and received, or, as it is now called, as Lord Goff pointed out in [Lipkin Gorman] ‘unjust enrichment at the expense of the owner of the money’.”
That passage (in which Dillon LJ was considering the position at common law) does not suggest that in the present context there is a new cause of action of unjust enrichment which is different from that of money had and received. It is simply another way of describing the same thing…. [the case] supports the Council’s approach in this case. That is, that it is entitled to recover the net payments made to the bank as money had and received on the basis that it is its money in equity or on the basis that there was no consideration for the payment of it. Both law and equity treat the bank as being unjustly enriched by the receipt of the Council’s money…”[14]There are, however, statements in the authorities pointing the other way. Perhaps the most striking is that of Lord Steyn in Banque Financière de la Cité v Parc (Battersea Ltd) [1999] 1AC 221 at page 227 where he posed the relevant questions as being as follows:
“Four questions arise. (1) Has OOL benefited or been enriched? (2) Was the enrichment at the expense of BFC? (3) Was the enrichment unjust? (4) Are there any defences?”
Neither that passage nor the surrounding text clearly indicates that Lord Steyn was looking to some established restitutionary ground of claim, or some development of it, in order to answer the questions relevant to the claimant’s case. The same might be said of a passage in the speech of Lord Hoffman at page 234C, though a closer scrutiny of the text makes it clear that he looks back to an established remedy (subrogation) which operates in certain circumstances and applied it by demonstrating unjust enrichment factors. In the same case, Lord Hutton certainly did not adopt the more general approach ostensibly adopted by Lord Steyn.[15]Mr Matthias conducted a further review of authorities and of text books in order to make good his thesis that it was now open to a claimant simply to plead facts which demonstrated unjust enrichment. Amongst them were Lord Goff’s dissenting judgment in the West Deutsche case in the House of Lords (where the dispute had narrowed down to a question of interest). Mr Matthias said that at page 974 Lord Goff, dissenting, employed a generalised unjust enrichment test, thereby demonstrating that the law had moved on. I do not think that that particular passage assists him. Apart from being a dissenting speech (albeit from a master of the law in this area), the passage in question is not dealing with an unjust enrichment claim as such; it is dealing with the question of interest. The remarks of Lord Goff have to be judged with that in mind. I do not think that they support Mr Matthias. The same is true of his reliance on Lord Woolf’s speech in the same case at page 1003-4. In addition he relied on Countrywide Communications Ltd v ICL Pathway Ltd (N Strauss QC sitting as a deputy High Court judge, 21st October 1999) and McDonald v Coys [2004] EWCA Civ 47. The first case does not really assist because on its facts it can be brought within one of the established ways of bringing unjust enrichment claims. The second is more helpful to him. At para 22 Mance LJ sets out the following:
“Restitution – General. 22. The issue which is basic to all aspects of this appeal is whether the circumstances give the Cressmans any claim against Mr McDonald based on unjust enrichment. It is common ground that four questions arise when considering a claim for unjust enrichment: [and he then sets out the four questions set by Lord Steyn in Banque Financière].”
It does appear there that Mance LJ was applying a more generalised test. Having said that, it appears that at page 37 he glances back towards a more specific basis of claim:
“Looking at the matter generally, I have no doubt that justice requires that a person who (as a result of some mistake which it becomes evident has been made in the execution of an agreed bargain) has a benefit or the right to a benefit for which he knows that he has not bargained or paid, should reimburse the value of that benefit to the other party if it is readily returnable without substantial difficulty or detriment…even if realisable benefit alone is not generally sufficient the law should recognise, as a distinct category of enrichment, cases where a benefit is readily returnable.”
Mistake is one of the established bases of a restitutionary claim (as in payments made under a mistake of fact or a mistake of law). The case might therefore be regarded as an extension of that line of cases or that manner of claim.[16]Having considered the wide ranging material put to me by Mr Matthias (wide ranging despite the relatively short period of time that this case took – argument on all issues took less than a day), it seems to me that it has not been established that the authorities have yet moved to a position in which it can be said that there is a freestanding claim of unjust enrichment in the sense that a claimant can get away with pleading facts which he says leads to an enrichment which he says is unjust. The authorities, and at least some academic opinion, still support the view that on the present state of the authorities, the law has not yet got that far. It seems to me to be clear that that is the present state of the law. Were it necessary to decide the case on this basis, I would be likely to decide that despite the undeniable fact that the law of restitution is still developing. It has not developed and is unlikely to develop (at least in the foreseeable future) to that extent. A claimant still has to establish that his facts bring him within one of the hitherto established categories of unjust enrichment, or some justifiable extension thereof. Were it otherwise, then why did the claimants in the West Deutsche case have to go to such lengths to establish that their facts fell within one of the then established categories or recovery bases (by extension)? The same is true of Kleinwort Benson v Lincoln City Council [1999] 1AC349. That case established that it was no longer true to say that a payment made under a mistake of law was irrecoverable. I think that if there had been a general ground of recovery based on “unjust enrichment” which it could invoke by pleading facts and alleging injustice, then the speeches in that case would have taken a rather different form.[17]Probably the high point of the authorities invoked by Mr Matthias in support of his case is the unreported Court of Appeal case of Brennan v Brighton BC (CA, unreported, 7th May 1997). In that case the claimant, a Mr Brennan, entered into discussions with the local authority which owned land on which sports facilities were situated. He agreed with the representatives of the Council that in order to develop the land a company limited by guarantee would be incorporated and would be granted a 31 year lease. In an expectation that the lease would be granted upon substantial completion of the development, Mr Brennan spent money personally on and in connection with the development, introduced a substantial sum of money into the company, and gave a suitable amount of time for which he was entitled to charge the relevant sports club concerned. The local council then declined to grant the lease which had been agreed on. The plaintiff claimed for fraudulent misrepresentation and then, after the limitation period had expired, sought to add a claim for a sum of money which he described as money laid out by him personally in the expectation that the lease would be granted. This seems to have been treated by Pill LJ as “a restitutionary remedy based upon the principle of unjust enrichment”. Most of the debate in the case turned on whether such an amendment should be allowed outside the limitation period. The Court of Appeal held that it should not. That made it unnecessary for them to consider the actual strength of the claim which it was being sought to introduce. However, both Pill LJ and Slade LJ considered briefly the strength of the claim. Pill LJ described the claim as being one in which:
“The plaintiff claims that the defendants have been unjustly enriched at his expense and should not be allowed to retain the benefit”
. It was submitted by counsel for the Council (Mr Matthias, as it happens) that to grant such a claim would involve a massive leap in the law of restitution and not just a mere development, particularly since what was required was a substantial piercing of the corporate veil. Those submissions were rejected by the court. Pill LJ said:
“Not only was there a particularly close relationship between the plaintiff and the Racquets Club but the defendants encouraged the plaintiff to work through the medium of the company and required him to control the venture personally through that medium, as stated in the paragraphs from the intended statement of claim already set out. The company was only the ‘conduit’ (a word used by Saville LJ when considering the converse situation in Kleinwort Benson…) through which the plaintiff’s funds enriched the defendants. Mr Foskett accepts that the claim was on ‘the outer limits of the current boundaries of the law of restitution’ but submits that it should not be struck out….I see considerable force in the submissions of Mr Matthias, particularly that based on the principle in Salomon. The proposed claim would have been a most difficult one and I would not rate the prospects of success at all highly. However, given the relationship between the three parties, that is the plaintiff, the racquets club and the defendants, the conduct of the defendants towards the plaintiff and the enrichment of the defendants which resulted from the transactions, I would not have been prepared to hold that it was a plain and obvious case in which the jurisdiction to strike out should have been exercised.”
Slade LJ observed:
“[The] facts are somewhat striking. The plaintiff, on the advice and insistence of the defendants, among others, formed the company, Brighton Racquets Club Ltd, which was merely his ‘corporate personification. Through the company he personally controlled the development of the site as a tennis centre. He advanced substantial sums to the company and guaranteed its obligations in substantial sums. He did a lot of work for it. All this was in the expectation that the defendants would honour their obligation to grant the 31 year lease to the company on completion of the centre…. For the purposes of this appeal, the defendants do not dispute that they were enriched. If that enrichment can properly be regarded as having been at the expense of the plaintiff, it is in my judgment plainly arguable that the enrichment was unjust, in the light of the circumstances summarised above. The major hurdle facing the plaintiff would be that of satisfying the court that, for the purposes of the law of restitution, the enrichment could properly be regarded as having been at the expense of the plaintiff and not exclusively at the expense of the company. I think that the plaintiff’s prospects of surmounting this hurdle would have been somewhat slender, since it would have involved persuading the court in effect to lift the corporate veil. [He then observes that the claimant will be assisted by some observations of Lord Woolf in West Deutsche and then goes on] Notwithstanding the Salomon principle, I would not for my part have ruled out the possibility that at the trial, the court, after full investigation of the special circumstances of this case, and the special relationship between the plaintiff, defendants and the company, might have considered it essential to allow the plaintiff a restitutionary remedy in order to do full justice as between him and the defendants. Accordingly, by a narrow margin, I would not have considered this such a plain and obvious case as to justify the court exercising the draconian remedy of striking out the statement of claim.”
Mr Matthias relies on that case as demonstrating, first, that a claim can be phrased generally as a claim for unjust enrichment without bringing it within or close to some established category or factual recovery situation, and secondly as showing a case in which the court was, on facts with significant common elements with the facts of our case, prepared to contemplate allowing such a remedy. As to the first, it has to be borne in mind that the observations of the Court of Appeal were short observations made when they had already decided against the plaintiff on different grounds. They do not purport to analyse the claim in any depth. It would certainly be possible to say, as Mr Hibbert has suggested, that the facts of the case brought it arguably close to a line of cases in which recovery has been permitted in circumstances where there has been expenditure in anticipation of a contract that did not materialise. Accordingly, although a case might not have been pleaded in terms which expressly invoked that line, it is certainly consistent with it. I think that Mr Hibbert is right about that. I therefore do not think that that case gives Mr Matthias the support that he needs in that respect. As to the second part of his reliance, it seems to me that the facts of that case are a long way away from the facts of the present case. I shall develop this point below, and for the moment would confine myself to observing that the Court of Appeal in that case expressed the view that it was only just on the “survival” (my word, not theirs) side of the survival/striking out line. If it is relevant to measure the present case by reference to the facts of another case (perhaps a dubious exercise) then it seems to me that the present case is very much weaker than that was on the facts, and its distance from the facts of the Brennan case puts it considerably over the wrong side of the line. This point will, however, be developed further below.[18]Accordingly, had I had to decide the point in this case, I would be likely to have decided against the claimant and Mr Matthias. That being the case, it would follow that the claim fails because it does not plead facts which are capable of bringing the case within one of the established restitutionary claims or some justifiable extension of them. By that I do not mean merely that it fails to incorporate some particular form of words. If the facts were sufficient it would not matter that there is no pleading of some particular category of restitutionary claim. I mean that the facts themselves do not come sufficiently close to the required objective. When asked which established claim he would rely on if necessary Mr Matthias could only suggest unconscionability (not enough by itself) or an extension of the claim for the money paid for a consideration which has wholly failed. This latter point will not assist him. It might describe a claim against the developer companies, but it cannot begin to describe the claim against the defendant.[19]However, because of my views on the other limbs of the case, I do not have to decide this point and can base my decision on those other points. If “unjust enrichment” exists as a stand-alone wrong, has the claimant made out a sufficiently arguable case for invoking it?[20]A number of significant facts are assumed to be true for this purpose. The claimant is assumed to have paid the sum of money that he alleges (£125,000) – in fact it seems to me that this is likely to be accepted at a trial. It is assumed that he paid the first £50,000 before Arrish Limited went into receivership, as part of the purchase price. It is assumed (and is likely to be proved) that he paid another £75,000 to the fighting fund, which then found its way into Santa Barbara Limited and Pitchcott. It is assumed that this money went into the development of the land and improved its value. This is a rather more doubtful assumption since all sorts of things may have happened to the money which do not involve its going to enhance the value of the land. It was plainly mixed with the monies of others. However, this is a refinement I need not concern myself with. It is to be assumed, as pleaded, that the bank operated the drawdown procedure in bad faith, and contrived to bring about the receivership of Pitchcott and Santa Barbara Limited with a view to taking the development into its own ownership through its subsidiary, and that that happened. It is also assumed that the deal with LSI was that referred to above, under which LSI paid enough money to extinguish the outstanding debt (which is not relied upon as enrichment) and somehow agree to introduce further business which is relied upon as a form of enrichment. Whether or not it has that last quality is one of the questions I shall have to decide, but everything else just referred to is, in effect, to be taken as having been established for the purposes of this question.[21]Mr Hibbert’s point is that, even given whatever injustice may be said to have been perpetrated in the defendant’s plans, what is not demonstrated as a result of all that is that there has been anything which the law of unjust enrichment would regard as an enrichment of the defendant at the expense of the claimant. There is no sufficient nexus between the payment of Mr Uren’s money, the acts of the defendant bank and the benefits flowing from the arrangements with LSI. Mr Matthias says there is a sufficient link. Mr Uren has paid £125,000. It has gone into the development. The defendant has embarked on a course of conduct which reduced the development into its hands, and it has have now made a profit from it in the amount of the sums paid by LSI over and above the amount necessary to discharge the original debt owed by Pitchcott. He points out, and relies on, the fact that the defendant from time to time indicated that it was going to protect, or have regard to, the interests of the purchasers by getting an ultimate purchaser of the development to acknowledge their rights to flats. It has reneged on those indications. It is only because the bank had the advantage of the contributions of people like Mr Uren that it had an asset that it could sell at such a value. It has behaved unjustly in order to put itself in that position; therefore he can make out the ingredients of a claim in unjust enrichment as those ingredients are set out by Lord Steyn in the extract referred to above.[22]I am afraid that I do not accept those submissions on the part of Mr Matthias. I have approached this question with all the caution required of a court considering a defendant’s summary judgment application, or a defendant’s application to strike out. I must be satisfied that at the trial there will be nothing emerging, or likely to emerge, which will assist the claimant. However, making all due allowances, and giving full effect to the assumed facts (which put the case at the highest level at which Mr Uren can hope to establish it at a trial) Mr Uren is still bound to fail. The reason is that one can only say that the defendant had been enriched at the expense of Mr Uren in an unjust way by a very loose and generalised use of language and concepts which are not appropriate to a legal analysis of the situation. The answer to the point lies in an appreciation that the benefits to the bank do not, in law, amount to an enrichment at the expense of Mr Uren. Let it be allowed for the moment that the bank had indeed been enriched in the sense that it is financially better off at the end of the sequence of events than it was at the beginning, and that it has achieved that by the terms on which it realised its (or its subsidiaries) interest in the development. It cannot, in my view, be said that that was done at the expense of Mr Uren. Mr Uren’s first £50,000 became lost to him at the latest when Arrish Limited became insolvent (as it apparently did) and went into receivership. The property was then sold away from Arrish Limited. At that point Mr Uren had (presumably) the benefit of a worthless unsecured claim against Arrish Limited. He had no claim against the bank at that stage. At that stage, the bank has not acquired the benefit of his money by any unjust means, even though it then acquired the property by taking it into a subsidiary. Mr Uren’s next tranche of money (the £75,000) was first paid into the fighting fund. I assume that it was in no way dissipated there and survived intact so that it could be passed on at the next stage. That next stage was when the fighting fund provided the money to Santa Barbara Limited so that it could be used to discharge an outstanding indebtedness of Pitchcott to the bank (presumably arising when Pitchcott borrowed money to buy the development from Arrish Limited). At this stage Pitchcott probably owed the £75,000 to Mr Uren, or to someone else on his behalf. Although it was apparently intended at some stage that the purchasers should have shares, that never happened. When Mr Uren provided his money to the fighting fund, the fund either held it beneficially for him or he lent it to the fighting fund. When the money was passed into Santa Barbara Limited/Pitchcott, it seems likely to me that the transaction became one of loan. It may be that an alternative analysis would be that it was treated as an advance payment of the purchase price. Whichever analysis is the case, Mr Uren got whatever it was that the transaction gave rise to – some cause of action against Pitchcott (probably) but absolutely no relationship with the bank. It is true that there is a pleading (which is assumed to be true for these purposes) that the bank encouraged the fighting fund to put its money into Pitchcott, but that money did not go to pay for the development: it went to repay an indebtedness to the bank.[23]So at this stage of the analysis neither sum of money has gone to enrich the bank (or at least not in any material way). It has been used as advance payments or as loans. All the usual instances of unjust enrichment involve the payment of money, or the transfer of property, by the claimant to or for the benefit of the defendant, which of itself either at that time or by the operation of intended facts, produces some form of benefit to the defendant amounting to enrichment. Nothing like that has happened in the present case. What has happened in this case is that Mr Uren has spent his money, and lost his money, in and towards the development of land. That developed land has come into the hands of the defendant, and (on the assumed facts) it has come into the hands of the defendant as the result of an injustice. There is not, however, the necessary link between the first set of events and the second set to enable Mr Uren to be able to say that the enrichment of the defendant is at the expense of him. It is not enough to say that the defendant has had the benefit of the expenditure by the claimant; there must, in my view, be some causal connection or nexus.[24]The point can be developed by reference to the speech of Lord Clyde in Banque Financière at page 237F:
“Without attempting any comprehensive analysis, it seems to me that the principle [of unjust enrichment] requires at least that the plaintiff should have sustained a loss by the provision of something for the benefit of some other person with no intention of making a gift, that the defendant should have received some form of enrichment, and that the enrichment has come about because of the loss. The loss may be an expenditure which has not met with the expected return….”
The “some other person” in that citation is, in my view, clearly the same person as the defendant – otherwise the citation contains no causal connection between the events at all. If that is right, then the application of that analysis demonstrates why it is that Mr Uren fails in this case. If one breaks it down, one has the following elements: (i) the plaintiff has sustained a loss; (ii) he has done so by providing something for the benefit of some other person. That other person in this case was two people – first Arrish Limited and second Pitchcott. It was not the bank. (iii) With no intention of making a gift – Mr Uren satisfies that. (iv) That the defendant should have received some form of enrichment – the bank has, on these facts, received some form of enrichment, but only in a generalised sense. (v) That enrichment has come about because of the loss – this is not established. The enrichment has come about because the bank, through its subsidiary, acquired the development property and then turned a profit on a subsequent sale. It has not achieved that enrichment “because of the loss” to Mr Uren.[25]The same point can be made by reference to the speech of Lord Goff of Chieveley in Kleinwort Benson at page 373D. In this passage he is considering defences, and in particular the defence of change of position. In that context he observes that “recognition of a defence of change of position demonstrates that this must be proved in fact if it is to justify retention, in whole or in part, of money which would otherwise be repayable on the ground that the payee was unjustly enriched by its receipt” (my emphasis). This again demonstrates the degree of connection which must exist between the payment of the money on the one hand and the production of the enrichment on the other. This degree of connection simply does not exist in this case.[26]In analysing the matter in this way I would not wish to suggest that it is necessary to come within some strict form of words. What is, however, necessary is to bring the case within justifiable legal concepts. The passage from Lord Steyn clearly suggests, not surprisingly and in accordance with what one would normally expect to be the principles applicable, that there should be some proper connection between the payment of the money and the enrichment. That is usually achieved in unjust enrichment cases by demonstrating money flowing from A to B, or money flowing from A to B’s benefit because, for example, it has been spent on B’s property. That sort of flow, or something like it, is simply not demonstrated in the present case. Mr Uren’s first £50,000 was lost when Arrish Limited went into receivership. His next £75,000 was lost when Pitchcott became insolvent. When it was lost the bank was not thereby enriched.[27]Accordingly, on this basis, Mr Uren’s case fails. It is plain to me that this analysis demonstrates that Mr Uren does not have an arguable case which is worthy of a trial. I bear in mind, of course, the parallels which are said to exist between this case and the Brennan case referred to above. However, I do not think that those parallels exist. In considering that case, I remind myself first of all that that case, strong though it was on the facts, was found by the Court of Appeal to be only just on the right side of arguability. The present case is much weaker than that. In the present case it cannot be said that either Arrish Limited or Pitchcott, which received the money, was in any real sense the contractual alter ego of Mr Uren. They were merely the developers from whom he hoped to purchase his flats. Although there is some pleading of encouragement on the part of the bank that the fighting fund should put money back into the development, it was not the sort of encouragement which was alleged and assumed in Brennan. Furthermore, in Brennan there was a direct causal connection between Mr Brennan’s money and the Council’s financial interest. Mr Brennan’s money went to improve land which actually belonged to the Council at the time the money was applied. This case, on its facts, is therefore a very long way away from the facts assumed in the present case. It does not give Mr Uren the degree of support that he requires.[28]This does not mean of course that there is no remedy on the supposed facts of this case (though the passage of time may in fact mean there is no remedy). If the bank has behaved as badly as is alleged, then there would almost certainly be remedies vested in Pitchcott, and conceivably Santa Barbara Limited. If the bank’s refusal to honour the loan arrangements properly was a breach of contract, then any loss flowing would sound in damages. If the bank has contrived a situation which enabled it to acquire the property at an undervalue and then turn it to advantage, then again Pitchcott, as the owner of the property, would presumably have a remedy. Those claims may or may not be without their own difficulties, but if wrongs were committed then those claims ought to exist. I am told that the receivers of Pitchcott have declined to pursue the bank. I do not know the extent to which that is true, or if it is true what the reasons for it are. However, if it is the case, then that is very unfortunate for the purchasers (if they would otherwise have benefited from such claims) but that misfortune cannot be overcome by seeking to fashion a remedy based on unjust enrichment in order to overcome the inconveniences of the chain of contracts and incorporation that exist in this case and which have their own consequences. The purchasers may feel that the bank has been enriched, that it has behaved unfairly, and that they have lost, but it is not appropriate to put all those ingredients in some melting pot, give it a stir and pull out a newly cast unjust enrichment claim. A proper degree of analysis is required.

Limitation

[29]The last point arising on this appeal is the question of limitation. The defendant relies on limitation to defeat the claim. It is accepted by both sides that a 6 year period applies from the date of accrual of the cause of action. What is not agreed is when the cause of action accrued. The defendant says that the cause of action (assuming there to be one) accrued when the development was acquired by its subsidiary Agosto 96. That is when the benefit of the payments made by the claimant became benefits for the defendant. That was more than 6 years before the issue of the claim form in these proceedings. The claimant says that the cause of action accrued when the wrong was completed by the enrichment of the defendant. That enrichment did not occur when Agosto 96 acquired the property; it occurred when the LSI deal was done and the extra profit (in the form of the promise or guarantee of further business) was made available. If the defendant is right then this claim is statute barred, because the acquisition by Agosto 96 was in 1996. If the claimant is right then the claim was just brought in time (on the assumed facts of the present application). The question for me is which party is right, or more correctly has the defendant shown that there is no case worthy of trial on this point.[30]Neither party was able to show me any authority directly in point. The defendant relied on analogies that I did not find helpful. It also relied on a statement of Lord Hope in Kleinwort Benson at p 409:
“I agree with Brennan J’s observation in the David Securities case 175 CLR 353 that the right to recover the amount paid by mistake accrues at the moment when the sum is received by the payee …”; And on a statement by Hobhouse J in Kleinwort Benson v South Tyneside BC [1994] 4 All ER 972 at 978: “The cause of action in money had and received arises when the relevant money is paid by the plaintiff to the defendant.”
I do not think that either of those statements helps much in the present case. The first was not uttered in the context of considering a limitation point, and both were uttered in a context in which, if there was enrichment, the enrichment obviously occurred when the money was paid by the payer and received by the payee (which were one and the same time). In the present case, if there is a cause of action which depends on enrichment, and if there was enrichment, the enrichment was not at the same time as the money was paid by Mr Uren. It was distanced in time from then. The earliest possible date is when the defendant’s subsidiary acquired the development property.[31]I have to address this question on the supposition that there is a cause of action in unjust enrichment as such which is made up of the ingredients put forward by Lord Steyn in the passage cited above. If that is right then there can be no cause of action until there is enrichment; but once there is enrichment the cause of action is complete. In this case that event must be when the defendant achieved its deemed objective of getting the development into its hands. There are two possible analyses of what happened on that occasion. Either it paid a proper value for the property at the time or it paid an undervalue. (I dismiss the possibility that it paid more than the true value for these purposes, though if it did then the position would be same for these purposes as if it had paid the true value.) These two alternatives play out as follows:(i) If it paid the true value it has not been enriched at that point in time. If it holds on to the property and manages to gain a profit over time then in an everyday sense it might be thought to have become enriched (in the sense that it was better off than it was before that profit accrued) but that enrichment does not flow from the payments by Mr Uren. The profit at this stage is nothing to do (legally) with the “wrongs” that have gone on before. The profit flows from other things occurring after the relevant events; a rise in land values, a particularly good bargain struck, a particularly naïve purchaser – there are a number of theoretical possibilities, but none of them relate to the payments by Mr Uren and the factors said to create injustice. The profit does not complete the cause of action by providing enrichment. This is another aspect of the second of the main points that I have considered above. There has been no relevant enrichment at all.(ii) If it paid less than the true value then there has (on the present hypothesis) at that stage been an enrichment. That, however, is too early for Mr Uren in the present case because he did not start his proceedings within 6 years of that event.[32]I therefore conclude that even if Mr Uren has a cause of action in unjust enrichment based on the acts of the bank in this case then any such cause of action would be statute-barred. In a sense this is another aspect of the second of the main points arising in this case, namely that any enrichment that the bank has suffered (as relied on by Mr Uren) is not an enrichment attributable to the wrong in this case. If there was an enrichment it must be measured by what the bank acquired, not by what the bank subsequently did. It is false to test the enrichment by the latter (which is another way of saying that the pleaded cause of action is bad). If one tests it by the former, then any cause of action is statute-barred. Mr Matthias himself conceded that it is inconceivable that Mr Uren could have asserted that the bank had been enriched at his client’s expense before the sale to LSI. I am not sure that that is necessarily right on the way he puts his case – on the sort of line Mr Uren has advanced the bank could have been enriched when it acquired the property, depending on its then true value. But if it is right, then it must follow that the subsequent enrichment is not because of Mr Uren’s payments; it is because of other, extrinsic factors.

Conclusion

[33]In the circumstances it seems to me to be clear that Mr Uren’s pleaded case, even as amplified by the evidence in this case, is bound to fail at trial. There is no other reason for going to trial, so I shall allow this appeal and dismiss or strike out the action.

Cited in 8 later judgments