Unjust enrichment - Supreme Court enlightenment

16/08/2013

… The recent case of Benedetti v Sawiris [2013] UKSC 50 is a valuable reminder of the key principles of restitution and unjust enrichment and delivers an important development to this under-used remedy.

The remedy

The purpose of a restitutionary remedy, unlike a contractual or a tortious remedy, is not to compensate a claimant, but rather to deprive a defendant of a benefit which it does not deserve. An unjust enrichment action is a restitutionary claim which seeks to reverse a defendant's enrichment which has occurred unjustly and at the expense of the claimant…The value of an unjust enrichment claim is not the value of the claimant's loss but the value of the defendant's gain [Boake Allen Ltd v HMRC [2006] EWCA Civ 25] and that is assessed as quantum meruit (or a fair and reasonable sum).

The valuation

The Supreme Court enunciated the following principles for the valuation of an unjust enrichment:

the starting point is the objective market value of the benefit (here, the brokerage services) provided by the claimant

the test for objective market value is the price which a reasonable person in the defendant's position would have to pay for the benefit

circumstances to take into account when considering the position of the defendant include the availability and costs of similar services provided by alternative suppliers; prevailing rates and practices in the relevant market; relevant characteristics of the defendant, such as his credit rating or whether he belongs to the public or private sector

the principle of subjective devaluation (i.e. where a defendant can objectively prove that a benefit is worth less to him than market value, for example where he only assumed a responsibility for payment on a particular basis, such as the benefit would be provided at half price as an introductory offer) is acceptable

the principle of subjective revaluation (i.e. where a claimant proves that a defendant values a benefit at, and must therefore pay, more than market value) is not recognised in the law of restitution. The market value of a benefit is therefore, except perhaps in exceptional circumstances, effectively a cap on the defendant's enrichment and on the level of the claimant's recovery.

The questions of subjective devaluation and revaluation arose because Mr Benedetti argued that he was aware, from earlier discussions, that Mr Sawiris valued his services at higher than market value and had previously offered payment in that higher amount. In order to successfully claim a higher than market value, Mr Benedetti would have had to establish the existence of the principles of both subjective devaluation and revaluation, which he was unable to do…

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