(B) THE BIRTH OF THE UNJUST ENRICHMENT PRINCIPLE

It is not much of an exaggeration to say that the modern unjust enrichment principle was created by Lord Goff and that it was strongly influenced by his own writings as a jurist and his subsequent judgments. The seminal Law of Restitution, written with Gareth Jones, was published in 1966 and established that the recognition of the unjust enrichment principle by the courts was a natural development for English law to take. When Robert Goff became a judge he used the unjust enrichment principle to explain the operation of the Law Reform (Frustrated Contracts) Act 1943.^{[1] [2]} On elevation to the House of Lords he had an opportunity to recognize formally the unjust enrichment principle in Lipkin Gorman (a firm) v Karpnale.²⁹

Although this decision is of profound significance to the recognition and subsequent development of the unjust enrichment principle, it was an inappropriate vehicle for its recognition and should not be considered to be a case about unjust enrichment at all. Rather, it concerns the vindication of property rights.^[3] One of the partners of the claimant firm of solicitors, Cass, had authority to draw on the firm’s client bank account on his signature alone. Cass was a compulsive gambler who stole over ?300,000 from the account, which he used to fund his gambling habit at the defendant casino. On discovering what had happened, the firm sought to recover the stolen money from the club. The House of Lords held that the claim against the club for money had and received should succeed because it had been unjustly enriched, although the liability to make restitution was reduced to the extent that the club had changed its position. The unjust enrichment principle was recognized as underpinning the claim for money had and received, with specific reference to the judgment of Lord Wright in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd.³¹ But surprisingly little was said about the elements of this principle, other than that the defendant’s enrichment must have been obtained at the claimant’s expense; a ground of restitution was not identified. Further, the defendant’s enrichment was not directly at the expense of the claimant.^{[4] [5]} Lord Goff did, however, emphasize that the principle did not enable the court to reject a claim simply because it was considered to be unfair or unjust.

In fact, the reason why the House of Lords considered that the defendant casino should make restitution was because the money which had been stolen from the client account belonged to the claimant firm of solicitors. So Lord Templeman recognized that^[6] ‘in a claim for money had and received by a thief, the plaintiff victim must show that money belonging to him was paid by the thief to the defendant and that the defendant was unjustly enriched and remained unjustly enriched’.

The claim should properly be analysed as being based on the vindication of the firm’s property rights in the money and was in fact analysed in this way by both Lords Temple- man and Goff. Lord Templeman’s analysis was rather unsophisticated. He asserted that the claim depended on the defendant’s retention of the money, although this appeared to reflect confusion about the role of the defence of change of position. In fact, Lord Goff emphasized that the claim for money had and received did not depend on the club’s retention of any money; it was a personal claim which turned on whether the club had received money in which the firm had a continuing proprietary interest at the time of the defendant’s receipt. Lord Goff acknowledged that the firm needed to establish a basis on which it was entitled to the money and it could do so by showing that the money was its legal property. Particular reliance was placed on the decision of Lord Mansfield in Clarke v Shee and Johnson,³⁴ where the claimant recovered money which had been stolen by his servant, who had used it to buy lottery tickets. The claimant successfully sued the defendants who ran the lottery. Crucially, Lord Mansfield specifically recognized that the claimant sued ‘for his identified property’.³⁵ The significance of this to Lord Goff was that the claim was ‘founded simply on the fact that, as Lord Mansfield said, the third party cannot in conscience retain the money—or, as we say nowadays, for the third party to retain the money would result in his unjust enrichment at the expense of the owner of the

> 36

money’.

Now it is true that Lord Goff used the unjust enrichment principle to justify restitution in that case, but he did not need to do so, because the claim turned on the vindication of a property right. That is why in Lipkin Gorman itself, rather than searching for a recognized reason why the enrichment was unjust, Lord Goff focused instead on showing that the defendant had received money which belonged to the firm at Law. He held that the firm did not have any proprietary rights in the money which was credited to the client bank account because Cass had authority to draw money from the account. However, he concluded that, since the bank owed the money to the firm, the firm owned a chose in action at law which it could trace into the cash drawn from the bank account by the solicitor and into the money received by the club. But this does not satisfactorily deal with the fact that the money drawn by Cass belonged to him because he had authority to draw on the account. True, his act of drawing the money constituted theft, because he had interfered with another’s property rights dishonestly, but this did not render the withdrawal unauthorized. Lord Goff’s analysis was half-hearted, and he seemed almost too ready to reach the desired result of allowing restitution, but without providing convincing reasons, especially as to how it was possible to identify a continuing proprietary interest in money which clearly belonged to the thief.^[7]

The reasoning of the House of Lords could have been much clearer without the distraction of unjust enrichment. If, instead, the focus had been on the vindication of property rights at law, it would have been clear that the firm had to show that it had title to the money paid to the defendant. It could not have shown this and so the claim should have failed.^[8]

In addition to the recognition of the unjust enrichment principle, the most significant aspect of Lipkin Gorman was the recognition of the change of position defence, which has been vital to the future development of the law of unjust enrichment. It is only because such a defence was recognized that it has been possible to expand the unjust enrichment principle itself, as Lord Goff acknowledged would be the case.^[9] The essence of that principle is that the defendant is liable without proof of any wrongdoing or bad faith; liability is strict. This would make the award of restitutionary remedies difficult to justify if, for example, the claimant has made a mistake which was not induced by the defendant, for why should the defendant be required to make restitution when the claimant was to blame? But the award of a restitutionary remedy in such circumstances is much easier to justify if innocent changes in the defendant’s position can be taken into account to reduce or negate the defendant’s liability, and so enable the defendant’s autonomy to be respected. If the defendant’s position has not changed then it is clearly much more appropriate that the defendant should make restitution to the claimant, in order to return the parties to their original position, as the corrective justice principle dictates.^[10] With the defence firmly in place, despite its ambit being left unclear, the courts could confidently expand the grounds of restitution which are available.^[11]

• [1] BP Exploration Co (Libya) Ltd) v Hunt (No 2) [1979] 1 WLR 783, 799. See p 357, below. See also BarclaysBank v WJ Simms (Southern) Ltd [1980] QB 677, 697 (restitution of mistaken payment, where the language ofunjust enrichment was not used but restitution was); British Steel Corporation v Cleveland Bridge andEngineering Co Ltd [1984] 1 All ER 504, 511 (anticipated contract); and in the Court of Appeal in Whittakerv Campbell [1984] QB 318, 327 (rescission preventing unjust enrichment).
• [2] [1991] 2 AC 548, 578. This had been prefigured in R v Tower Hamlets LBC, Exp Chetnik Developments
• [3] Ltd [1988] AC 8 58, 882. 30 See p 13, above.
• [4] [1943] AC 32, 61. 2 See further p 105, below.
• [5] 33 Lipkin Gorman (a firm) vKarpnale [1991] 2 AC 548, 559-60. 34 (1774) 1 Cowp 197, 98 ER 1041.
• [6] 35 Ibid, 200-1; 1043 . 36 Lipkin Gorman (afirm) vKarpnale [1991] 2 AC 548, 572.
• [7] That a thief can be guilty of a crime whilst still obtaining property rights has been explicitly recognized bythe House of Lords: Hinks [2001] AC 241.
• [8] See further p 560, below. 3 Lipkin Gorman (a firm) v Karpnale [1991] 2 AC 548, 581.
• [9] 40 See p 4, above.
• [10] 41 Especially the abolition of the bar on the recovery for mistake oflaw: Kleinwort Benson Ltd v Lincoln CC
• [11] [1999] 2 AC 349, 371-2 (Lord Goff). See p 162, below.