Dear Colleagues,



The UK Supreme Court has today given judgment in a big unjust enrichment case: Benedetti v Sawiris [2013] UKSC 50: http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2011_0087_Judgment.pdf (it has been some three years since the Court of Appeal decided the same case). The decision concerns the valuing of services and "subjective devaluation" in the law of unjust enrichment. The court unanimously dismisses the appeal on the legal principles but allows a cross-appeal as to the claimant's entitlement to further payment. It is a very long decision with quite a few disputes over the significance of the facts, but I shall offer a summary below in respect of the main restitutionary points of interest.



The case involved claims by Mr Benedetti against the defendant and various companies for vast amounts of money, in respect of services which he had performed in respect of the takeover of a company. The claims were framed in various different ways: as Lord Clarke lists at [3], "variously based on an alleged oral understanding (which he said was enforceable in equity by reason of the principle in Pallant v Morgan [1953] Ch 43), collateral contract, breach of fiduciary duty, unconscionable receipt, estoppel and quantum meruit." The judge had held that the objective market value of the services was 36.3 million Euros, but that the value to Mr Sawiris had been around 75m Euros (the claimant had received 67m Euros already as a brokerage fee). The only claim before the Supreme Court was for unjust enrichment. The cross-appeal in the case related to whether, to the extent that Mr Benedetti was owed anything by the defendants, he had already be paid it in respect of a brokerage fee which he had received. Lord Clarke gives the main judgment.



On subjective devaluation, Lord Clarke confirms that "the starting point in valuing the enrichment is the objective market value, or market price, of the services performed" (at [15]). In particular, there is no room to take into account the claimant's valuation of his own services (and the lapsed Acquisition Agreement between the parties was held to be irrelevant to quantification).



On what counts as "objective", Lord Clarke agrees with Etherton LJ that it is "the price which a reasonable person in the defendant’s position would have had to pay for the services". Lord Clarke endorses subjective valuation of services (the phrase "‘subjective devaluation’ is somewhat misleading", per Lord Clarke at [26]) "subjective devaluation is not about the defendants’ intentions or expectations but is an ex post facto analysis of the subjective value of the services to the defendant at the relevant time." And Lord Reed at [119]: "All that need be said is that, at whatever stage in the analysis the defendant’s freedom of choice is best taken into account, I am inclined to think that it is preferable that it should be done explicitly rather than on the basis of so-called "subjective devaluation"."



The Court recognises the doctrines/ideas of incontrovertible benefit and free acceptance as capable of defeating subjective devaluation. But Lord Clarke and Lord Reed do discuss the difference between their approaches in respect of the case where the defendant did not and does not want the services but accepts that he has received some value (though not the market value). Lord Clarke (at [26]) would take the defendant's valuation into account, Lord Reed would not.



"Subjective revaluation" (ie, arguing that the defendant valued the services more highly than the market or reasonable person would) is rejected (at least where the services or benefit do have an objective market value [29-30]): "The law of restitution, unlike the law of contract, is not primarily concerned with the intentions of the parties" ([33]). (In any event, on the facts, it is held that it would not be possible to work out what Mr Sawiris' subjective opinion of the value of the services actually was: [67]).



Lord Reed issues a separate concurring judgment, with some variation from Lord Clarke. His judgment is worth reading for its lucidity, and his general observations about unjust enrichment, which he views as grounded in corrective justice:

[99] The object of the remedy in a case of the present kind is therefore to correct the injustice arising from the defendant’s receipt of the claimant’s services on a basis which was not fulfilled. That injustice cannot be corrected by requiring the defendant to provide the claimant with the reward which either party might have been willing to agree. That is because, in the absence of a contract, neither party’s intentions or expectations can be determinative of their mutual rights and obligations. Nor can the court make the parties’ contract for them: a contract which might have included many other terms and conditions besides a price. In such circumstances, the unjust enrichment arising from the defendant’s receipt of the claimant’s services can only be corrected by requiring the defendant to pay the claimant the monetary value of those services, thereby restoring both parties, so far as a monetary award can do so, to their previous positions.

Lord Reed also carefully analyses Sempra (though his view as to how "subjective" the approach was in that case is not uncontroversial).



The Court allows the defendant's cross-appeal, holding that the first instance judge's apportionment was (essentially) unfathomable, and that, since Mr Benedetti had already been paid more than the value of his services, he was not entitled to any further payment. (For Lord Reed, this means that there was no question of unjust enrichment in the first place).



Lord Neuberger provides a concurring, mediating judgment as well, which I shall not extract beyond noting his observation that the "nearest one can get to the value of a good or service, at least in a capitalist system (which can be said to equate price with value, which has echoes of Oscar Wilde’s cynic), is its market value" (at [181]), and that, though he appreciates the differences between Lord Reed and Lord Clarke on subjective devaluation, he prefers to express a concluded view on the debate (at [188]).



Continuing the trend from the Court's previous decision in this area of the law, there is plenty of engagement with academic literature (including by several list members). As may be clear, although the case does give answers to some important and long-standing questions in our field, there remain several open points and a fair amount of saving things for as yet unknown "exceptional circumstances".



Best wishes,

James



--
James Lee
Lecturer and Director of Careers
Academic Fellow of the Inner Temple
Birmingham Law School
University of Birmingham
Edgbaston
Birmingham
B15 2TT, United Kingdom

Tel: +44 (0)121 414 3629
E-mail: j.s.f.lee@bham.ac.uk<mailto:j.s.f.lee@bham.ac.uk>



Web: http://www.birmingham.ac.uk/staff/profiles/law/lee-james.aspx


SSRN: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1192219

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