Unpaid Builder Cannot Claim In Restitution From Shareholders Of Client

Costello & Anor and MacDonald & Ors [2011] EWCA Civ930

MacDonald are builders. They entered in discussions to build on land owned by Mr & Mrs Costello. It was agreed that Costello would use, for tax purposes, a special purpose vehicle called 'Oakwood Residential Limited'. Oakwood had been used in a previous development which MacDonald carried out for the Costellos. Oakwood failed to pay some invoices. MacDonald obtained an order for payment against Oakwood and an award in restitution for unjust enrichment against the Costellos. The Costellos appealed against the restitution award.

The Court of Appeal allowed the appeal. Although the Costellos had undoubtedly benefited from (or, in restitution terms, had been enriched by) the work carried out by MacDonald, the unjust enrichment claim failed because it would undermine the contractual arrangements between the parties. The general rule to uphold contractual arrangements by which the parties define their mutual obligations reflected a sound legal policy which acknowledged the parties' autonomy to configure the legal relations between them and provided certainty. The general policy was that relief for unjust enrichment should be refused where it is claimed against a person who benefited from a claimant's services, but who had not been...