(i) The Objective Test of Enrichment

(1) The Nature of the Objective Test

The objective test of enrichment was carefully analysed by the Supreme Court in Benedetti v Sawiris,²² where Lord Reed distinguished between the ‘ordinary market value’ and the ‘objective value of the benefit’.²³ The former is the price which would have been agreed in the market in the absence of some unusual characteristic of the purchaser, whereas the latter is the value of the benefit to the reasonable person in the position of the defendant which would have been taken into account by the market and which may be higher or lower than the ordinary market value. Usually, both values will be the same, and it will be sufficient to assess what it would have cost a reasonable person to acquire the goods or services elsewhere in the market. This will depend on the specific circumstances operating at a particular place and time.²⁴ So, to use an example suggested by Lord Reed, in Vanity Fair²⁵ Becky Sharp sells her horse in Brussels following the battle of Waterloo, at a time when the inhabitants fear that Napoleon and his army is approaching. Consequently,

• 17 This passage was approved by Lord Clarke in Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938, [15].
• 18 As recognized by the Court of Appeal in Ministry of Defence v Ashman [1993] EG 144, 147 (Hoffmann LJ); McDonald v Coys of Kensington [2004] EWCA Civ 47, [2004] 1 WLR 2775, 2787 (Mance LJ); Benedetti v

Sawiris [2013] UKSC 50, [2014] AC 938.

• 19 See Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938
• 20

By virtue of the Law Reform (Frustrated Contracts) Act 1943. See BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 802 (Robert Goff J).

• 21
• 25

[2013] UKSC 50, [2014] AC 938 . ²² Ibid. ²³ Ibid, [108]. ²⁴ Ibid, [105].

By William Makepeace Thackeray, first published in 1847-48.

horses are exceptionally valuable, but the exorbitant price she obtains can still be considered to be the ordinary market value, objectively determined and assessed by the horse market in Brussels at that time. Lord Reed^[1] recognized that there were some goods or services which are so tailored to the preferences of a particular recipient that the idea of a reasonable recipient other than the actual recipient becomes unrealistic, such as costumes designed for the stage performance of a pop star. But even here the value of the costumes is not assigned by the recipient but is ascertained on the basis of objective evidence of the market value.

The objective value of the benefit may be higher or lower than the ordinary market value by virtue of the defendant’s position, so it is necessary to consider what aspects of the defendant’s position would be taken into account by the market.^[2] The defendant’s position does not include characteristics such as his or her generous or parsimonious personality,^[3] but will include, for example, the defendant’s buying power in the market which enables him or her to negotiate a lower price, the defendant’s credit rating and even, according to Lord Reed,^[4] the defendant’s age, gender, occupation, and state of health. For example, a famous film star who wishes to purchase a designer dress might obtain a significant discount because of the publicity generated if she wears it on the red carpet. Consequently, the fact that she is famous is an aspect of her position which affects the objective value of the benefit. Lord Neuberger considered that the claimant’s position might also be relevant to determine the objective value, such as where the claimant has particular expertise or experience, if this would have been reflected in the market.^[5] This approach to the analysis of objective valuation was considered to be consistent with the decision of the House of Lords in Sempra Metals Ltd v IRC,^[6] a case arising from the payment of tax which had been unlawfully levied prematurely. The claimant had paid tax due to the Revenue in circumstances where it should have been allowed to elect to defer payment for a period of time. Once the mistake was discovered, the claimant could not recover the money paid because it had discharged a legitimate tax liability,^[7] but the claimant successfully argued that the Government, through the Revenue, had been enriched from its use of the money during the period from when the money was actually paid until it would have been paid had the election for deferred payment been made. The starting point for valuing the Government’s benefit from the use of the money was to identify the objective value of the benefit, namely the reasonable cost of borrowing an equivalent amount of money,^[8] which was to be assessed by reference to compound interest, this being the conventional interest for ordinary commercial borrowings.³⁴ This was considered by the Supreme Court in Benedetti to be the ordinary market value of the use of the money. It was presumed by the majority in Sempra Metals v IRC³⁵ that the Government did benefit from the receipt of the money in that, if it had not been paid, it would have borrowed an equivalent amount from a different source. In determining the objective market value of this benefit it was appropriate to have regard to a person in the position of the defendant, namely the Government, which was able to borrow on more favourable terms at a lower interest rate. So the objective market value was the public sector borrowing rate,^[9] which was less than the interest which would have been charged to a commercial organization. The public sector borrowing rate is relevant to the objective value of the enrichment, since it is a factor which would be taken into account by the market in determining the value of the enrichment. Although there are dicta in Sempra Metals which appears to be consistent with the majority adopting a subjective valuation of the enrichment,^{[10] [11]} they were considered by the Supreme Court in Benedetti v Sawiris³⁸ to be ambiguous. All the Justices in Benedetti recognized that Sempra Metals actually involved objective valuation of the enrichment, having regard to the defendant’s position as a public body able to borrow at a lower rate of interest. Logically, as Lord Reed recognized, if the defendant has a poor credit rating and so could only borrow at a rate above the market rate, the objective value of the enrichment will increase.

It follows that objective devaluation and over-valuation of the market value of the enrichment have both been recognized by the Supreme Court. Whether the defendant’s circumstances should be characterized as affecting objective or subjective valuation will be a matter of judgment since, as Lord Clarke recognized, the line between them is narrow. Essentially the difference will depend on whether the defendant’s position would have been taken into account by the market in determining the value of the enrichment. If it would, it is relevant to the objective value. This matters because it affects the burden of proof, since the claimant bears the burden of proving objective enrichment. However, in Sempra Metals the majority recognized a presumption that the Government had been enriched by the receipt of the tax, in that it had the opportunity to use the money paid by the claimant rather than to borrow an equivalent amount from elsewhere. It was not necessary for the claimant to prove that the Government had relied on the receipt of the money in any way. The minority considered this to be a wholly conceptual benefit and wanted the claimant to bear the burden of proving that the defendant had actually relied on the receipt of the money. The approach of the majority is preferable, since it is appropriate to assume that the defendant has relied on the money in some way, since the defendant is in the best position to show there was no reliance on the receipt, for example because it was put in a box under a bed or credited to a non-interest bearing current account. Consequently, the majority presumed that the Government had been enriched, since if the money had not been paid prematurely it would have borrowed an equivalent amount from another source.

The recognition by the Supreme Court in Benedetti of the distinction between ordinary market value and the objective value of the benefit with regard to the defendant’s position means in effect that the law recognizes a core objective valuation with reference to the relevant market, but this can be objectively devalued or over-valued with reference to the effect of the defendant’s position on the market valuation.^[12]

(2) Positive and Negative Enrichment

The objective enrichment may take many forms. Often it will be positive, such as where the defendant receives a chattel or benefits from a service which increases the value of the defendant’s property. Alternatively, a defendant may be negatively enriched, for example where he or she has been saved an expense which would otherwise have been incurred.

This is illustrated by the facts of Craven-Ellis v Canons Ltd,⁴⁰ where the claimant director of the defendant company provided services to that company. These services were described as necessary to the running of the company, and so it is possible to conclude that the company had been enriched by them, because it had been saved money which it would otherwise necessarily have incurred had the claimant not provided the services.

(3) Receipt of Enrichment

The defendant cannot be considered to have been enriched objectively unless he or she has actually received a benefit. It is not sufficient for the claimant simply to have supplied a benefit to the defendant which has not been received. This follows logically from the essential nature of restitutionary claims, where the remedy is assessed by reference to the value of the benefit obtained by the defendant. This will be particularly important where the claimant argues that the defendant has been enriched by a service. Even where the alleged benefit takes the form of pure services, the defendant can only be considered to be benefited if he or she received the service. So, for example, if the defendant goes to a concert, he or she can only be considered to have been benefited by the musicians’ services if he or she actually heard the music.

It follows from the receipt requirement that the defendant cannot be considered to have been enriched simply because the claimant commenced work in providing a service. But not every case is consistent with this principle. This is illustrated by the difficult case of Planche v Colburn,⁴¹ where the claimant had entered into a contract with the defendant to write a book on the history of costume and ancient armour for ?100, to be published by the defendant in a series called The Juvenile Library. After the claimant had commenced research for the book, by visiting museums and consulting reference books, and had started to write it, but before he had delivered any part of the manuscript, the defendant abandoned the series in breach of contract and refused to pay the claimant for the work which he had done. The claimant successfully sued the defendant and recovered a sum representing the reasonable value of his work, amounting to ?50. The court apparently stressed that the remedy was a quantum meruit and that this was not awarded for breach of contract.^{[13] [14] [15]} It appears, therefore, that the claimant was awarded a restitutionary remedy by virtue of which the defendant was required to pay for the reasonable value of the services provided by the claimant. But this cannot have been a case where the remedy was awarded to reverse the defendant’s unjust enrichment, since the defendant had not received any benefit. At the time the doctrine of an anticipatory breach of contract, which enables a party to terminate the contract and recover compensatory damages, was not recognized. Since such a doctrine is now recognized,^{[16] [17]} as is the fact that acceptance of a repudiatory breach discharges a contract rather than renders it void ab initio,⁴⁴ it follows that, if the facts of Planche v Colburn arose today, the claimant would be able to sue for the anticipatory breach of contract and recover compensatory damages for expenditure incurred and the value of his services. Alternatively, the award of a restitutionary remedy might be justified if it was possible to estop the defendant from denying that he or she had received a benefit,⁴⁵ although this would be difficult to establish on the facts, even if estoppel was recognized in this context. The preferable view, however, is that the defendant should only be considered to be enriched where the benefit was received. Planche v Colburn should not be treated as an obstacle to this principle, because today such a case would be decided by reference to the law of contract.

• [1] Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938, [102].
• [2] A similar approach is adopted when identifying the benefit obtained from a crime for purposes of thestatutory confiscation regime. See Elsayed [2014] EWCA Crim 333, [2014] 1 WLR 3916, p 538, below.
• [3] Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938, [17] (Lord Clarke).
• [4] Ibid, [101]. 5 Ibid, [184]. 6 [2007] UKHL 34, [2008] 1 AC 561. See p 30, above.
• [5] 32 See p 146, below.
• [6] 33 Sempra Metals Ltd v IRC [2007] UKHL 34, [2008] 1 AC 561, [116] (Lord Nicholls).
• [7] 34 See further p 31, above.
• [8] 35 [2007] UKHL 34, [2008] 1 AC 561, [33] (Lord Hope), [102] (Lord Nicholls), [180] (Lord Walker).
• [9] Ibid, [50] (Lord Hope). 2 Ibid, [119] (LordNicholls), [49] (Lord Hope), and [184] (Lord Walker).
• [10] 38 [2013] UKSC 50, [2014] AC 938, [22] (Lord Clarke), [127] (Lord Reed).
• [11] 39 In Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938 Lord Reed, [108], recognized that there is room
• [12] for argument as to whether the variation in value by reference to the defendant’s position is an aspect of marketvalue or a departure from it. The preferable view is that it is an aspect of market value, since the defendant’sposition is only objectively relevant if it would have influenced the market value.
• [13] [1936] 2 KB 403. See p 81, below.
• [14] (1831) 5 Car and P 58, 172 ER 876. For the history of the case see C Mitchell and P Mitchell, ‘Planche vColburn (1831)’ in P Mitchell and C Mitchell (eds), Landmark Cases in the Law of Restitution (Oxford: HartPublishing, 2006), ch 4. See also Prickett v Badger (1856) 1 CB (NS) 296, 140 ER 123.
• [15] See Tindal CJ in Planche v Colburn (1831) 5 Car and P 58, 61; 172 ER 876, 877 (in argument). See alsoGoodman v Pocock (1850) 15 QB 576, 582-3, 117 ER 577, 580 (Patteson J).
• [16] See, for example, Hochster v De La Tour (1852) 2 E and B 678, 118 ER 922.
• [17] Johnson v Agnew [1980] AC 367.