Unjust enrichment, principle of

2021 SCMR 1728 SUPREME-COURT Judicial Precedent

AwardUnjust enrichment'Juristic reason' for enrichmentScope

Gas Supply Agreement ('GSA') between a power generation facility ('power company') and distributor of natural gas ('SNGPL')

Dispute over payment for gas after power company refused to take up gas from SNGPL

Question as to whether the award rendered by the Arbitrator in favour of SNGPL amounted to unjust enrichment

Held, that although SNGPL was receiving payment for the same amount of gas twice, it needed to be clarified that this was upon failure of the power company to take up the gas, and further, the SNGPL, in any case, was not recovering the same amount, due to the fact that it was redirecting transmission to its domestic consumers, which paid a lower tariff than Independent Power Producers (IPP) like the power company

Furthermore, to allow the power company's claim would mean overlooking the fact that SNGPL was still under an obligation to supply the Make-Up Gas to the power company at any time within the duration stipulated under the GSA, therefore, there was a 'juristic reason' for the enrichment

Further, the power company had failed to prove its deprivation as it was entitled to Make-Up Gas at a later date, which it failed to avail within the stipulated time frame

Furthermore the Arbitrator while dismissing the claim of unjust enrichment raised by the power company correctly explained that SNGPL expanded monies to construct the infrastructure to deliver gas to the power company; that SNGPL remained liable to its upstream suppliers even if the power company chose not to take the Take or Pay Quantity but opted to pay instead and to Make Up Gas later; that SNGPL had to bear the responsibility of cutting its losses and find an alternative buyer (even at a lower price) for the Gas not taken by the power company and the likely additional costs of its transmission, distribution and unaccounted for gas

Power company (appellant) had failed to make out a claim for unjust enrichment, and the award rendered by the Arbitrator was not disproportionate to the losses suffered by SNGPL

Appeal was dismissed.

2021 SCMR 1728 SUPREME-COURT Judicial Precedent

Scope

For a claim of unjust enrichment to succeed, there must be enrichment at the expense of the plaintiff and this enrichment must be unjust in such a way that there should be no lawful justification for the same.

2021 CLD 1069 SUPREME-COURT Judicial Precedent

Scope

For a claim of unjust enrichment to succeed, there must be enrichment at the expense of the plaintiff and this enrichment must be unjust in such a way that there should be no lawful justification for the same.

2017 SCMR 907 SUPREME-COURT-OF-UK Judicial Precedent

Pre-requisites

For a claim under unjust enrichment the basic questions to be examined by the courts were, whether the defendant had benefited or been enriched; whether the enrichment was at the expense of the claimant; whether the enrichment was unjust; and, whether there were any defences

Claimant seeking to recover in unjust enrichment had to satisfy the first three questions, and, if they were satisfied, it was then for the defendant to invoke the fourth question.

2017 SCMR 907 SUPREME-COURT-OF-UK Judicial Precedent

'Equitable subrogation' as a remedy for unjust enrichmentScope

Equitable subrogation was a remedy available to give effect to a proprietary right or in some cases to a cause of action

Subject to special defences, equitable subrogation served to prevent or reverse the unjust enrichment of the defendant at the plaintiff's expense

Subrogation did not restore the parties to their pre-transfer position; it effectively operated to specifically enforce a defeated expectation

Role of equitable subrogation was to replicate as far as possible that element of the transaction whose absence made it defective, which is why subrogation could not be allowed to confer a greater benefit on the claimants than he had bargained for.

2016 SCMR 1637 SUPREME-COURT-OF-UK Judicial Precedent

Illegality as a defence to a civil claimUnjust enrichmentIllegal contract

Whether a claimant who had transferred money pursuant to an illegal contract could recover the sums paid, when the contract was not executed

Principles

Circumstances in which illegality should be a defence to a civil claim

Plaintiff gave money to the defendant to buy shares on the basis of insider knowledge

Insider dealing plan did not materialize

Plaintiff sued the defendant to recover his money

[Per Lord Toulson: Plaintiff was entitled to restitution of the money which he paid to the defendant

Illegality did not necessarily prevent the operation of the unjust enrichment rules

Claimant who satisfied the ordinary requirements of a claim for unjust enrichment should not be debarred from enforcing his claim by reason only of the fact that the money which he sought to recover was paid for an unlawful purpose

In rare cases where for some particular reason the enforcement of such a claim might be regarded as undermining the integrity of the justice system, but there were no such circumstances in the present case]

[Per Lord Neuberger: In a case, such as the present one, the general rule should be that the claimant was entitled to the return of the money which he had paid

Such general rule would apply to any contract where the illegality would result in the court (if it could otherwise do so) not being able to order specific performance of the contract or damages for its breach

Even where the contemplated illegal activity had been performed in part or in whole, it would be right to apply the general rule in appropriate cases]

[Per Lord Mance: So long as restitution was possible, there was no inconsistency in the law in permitting a party to an illegal arrangement to recover any sum paid under it

In the present case plaintiff was entitled to require the defendant to return the stake which plaintiff put up for an illegal purpose to make profits for their joint benefit

Plaintiff's claim did not seek to enforce or profit by the illegality, it sought merely to put the position back to where it should have been had no such illegal transaction ever been undertaken]

[Per Lord Clarke: General rule that the claimant was entitled to the return of the money which he had paid was consistent with authority and with policy and rendered the outcome in cases of contracts involving illegality and the maxim ex turpi causa non oritur actio relatively clear and certain]

[Per Lord Sumption: Restitution being possible in the present case, the plaintiff was not barred from recovering the money which he paid to the defendant

Order for restitution would simply return the parties to the position in which they would and should have been, had no such illegal arrangement been made]

Supreme Court held that the plaintiff was entitled to recover the money paid to the defendant along with interest

Appeal was dismissed accordingly.

2016 SCMR 1637 SUPREME-COURT-OF-UK Judicial Precedent

Scope

Defendant's enrichment was prima facie unjust if the claimant had enriched the defendant on the basis of a consideration which failed

Consideration may have been a promised counter-performance (whether under a valid contract or not), an event or a state of affairs, which failed to materialize

Failure of the consideration for a payment meant that the state of affairs contemplated as the basis or reason for the payment had failed to materialise or, if it did exist, had failed to sustain itself.