Vol 14 (2017) - Issue 5

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Unjust Enrichment and the Direct Transfer Rule: Investment Trust Companies v Revenue and Customs Commissioners

On 11 April 2017 the Supreme Court handed down judgment in Investment Trust Companies v Revenue and Customs Commissioners [2017] UKSC 29 [2017] 2 WLR 1200. This judgment, given by Lord Reed, provides a welcome analysis of the requirement that a defendant must have been unjustly enriched 'at the expense of' a claimant if he is to claim restitution from him.

The basic requirements of a claim in restitution are well established. A claimant must establish that: (1) the defendant has been enriched; (2) at the claimant's expense; and (3) the enrichment was unjust. If these factors can be made out, and the defendant has not been able to rely on any defences, his claim will succeed. Where the claimant directly conferred the benefit on the defendant, the application of this test is, in principle, straightforward.

Complications arise, however, where the claimant has not dealt with the defendant directly. In these circumstances, a question arises as to what it means to say that a defendant's enrichment has been 'at the expense of' the claimant. Recovery in these circumstances was recently allowed by the Supreme Court in Menelaou v Bank of Cyrpus UK Ltd [2015] UKSC 66.
In that case the defendant bank had lent the appellant's parents money, secured by a charge over their home. They decided to sell and purchase another property, which they wanted to (and in the event did) gift to the appellant (Melissa). The bank agreed to release its charges on their property so that the sale could go through, on the condition (inter alia) that they have a legal charge over the new property. The solicitors confirmed that these conditions would be complied with. A legal charge was drawn up, purportedly signed by the appellant.