Recent Developments In The Law Of Unjust Enrichment - Paul Toms And Joseph Gourgey

• Published date: 07 October 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Contracts and Commercial Law, Trials & Appeals & Compensation
• Law Firm: Quadrant Chambers
• Author: Paul Toms and Joseph Gourgey

OVERVIEW

Over the summer, two interesting judgments were handed down by the Court of Appeal concerning the law of unjust enrichment. In this Article, we briefly consider Dargamo Holdings Ltd v Avonwick Holdings Limited [2021] EWCA Civ 1149 and School Facility Management Ltd v Governing Body of Christ the King College [2021] EWCA Civ 1053.

Dargamo Holdings v Avonwick

Facts

In the context of "bitter litigation" surrounding the division of shared business interests of three wealthy businessmen, the "Taruta Parties" claimed against the "Gaiduk Parties" for US$82.5 million, being part of the purchase price paid by the former under a share purchase agreement for the sale and purchase of Castlerose Limited.

The Taruta Parties sought to argue that that portion of the purchase price had been transferred in consideration for the Parties entering into legally binding contracts at a later date obliging the Gaiduk Parties to transfer further assets to the Taruta Parties, including 50% of their interest in two Ukrainian companies, NET and Agro Holding. Indeed, it was common ground that the total purchase price was intended to include the interests in these companies but that the Parties deliberately omitted any of the additional assets from the share purchase agreement hence there was no available claim for rectification. These interests were never transferred and consequently the Taruta Parties brought a claim for the sum of US$82.5 million in, inter alia, unjust enrichment.

At first instance, Picken J found that was there was no unjust factor so as to permit a claim in restitution.

Judgment of the Court of Appeal

The Court of Appeal upheld the first instance decision.

The appeal concerned the relationship between contract and unjust enrichment. Specifically, it addressed the following question: in circumstances where the contract was valid and subsisting and the consideration for the payment in question was expressly specified by the contract's terms, what scope was there for unjust enrichment to operate on the grounds of a total failure of basis or consideration for the payment?

Carr LJ gave the leading judgment in the Court of Appeal. She began by defining what she called the "Obligation Rule" namely that an unjust factor will not override a valid and subsisting legal obligation of the claimant to confer a benefit on the defendant.

She noted that there were exceptions to this principle although she remarked that "the rationale behind these exceptions is difficult to pinpoint" [72]. The appeal centred on the scope of these exceptions, including the cases of Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68 and Barnes v Eastenders Cash & Carry plc [2014] UKSC 26.
However, the present case was held not to fall under any of the exceptions for a simple reason: clause 2.4 of the contract defined the consideration for the purchase price paid by the Taruta Parties, which did not include the transfer of interests in NET and Agro Holdings. Clause 2.4 was, therefore, the express basis for the payment of the purchase price agreed in the relevant contract and Carr LJ held that there can be "no scope for the law of unjust enrichment to intervene by reference to a basis which is not only alternative and extraneous, but which also directly contradicts the express contractual...