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Dear Colleagues,

Over in the ODG we have been discussing Actionstrength Limited, a new the HL case dealing with estoppel, see http://www.parliament.the-stationery-office.co.uk/pa/ld200203/ldjudgmt/jd030403/action-1.htm. In our discussions Paul MacMahon, raised a very interesting point about UE which I thought merited discussion on the RDG. So with his permission, here is the issue.

The alleged facts of the case were as follows: Actionstrength (the sub-contractor) agreed with Inglen (the main contractor) to provide construction staff for use in connection with the construction of a factory for St-Gobain. When it became apparent that Inglen would fail to pay the sums due to Actionstrength, Actionstrength contemplated rescinding the contract. In order to keep the construction moving along, St-Gobain promised to if Actionstrength would keeping supplying their services, St-Gobain would pay any amounts that Inglen owed to Actionstrength. After completing the factory and being unable to obtain payment, Actionstrength sued St-Gobain on the guarantee. The courts found that the guarantee was unenforceable since it violated the statute of frauds. At issue in the HL was whether Actionstrength could use estoppel to enforce the guarantee. Their Lordships unanimously deciding that estoppel could not be used.

In response to these facts Paul questioned:

I wonder whether there is any possibility of a claim in unjust enrichment succeeding on these facts. Actionstrength continued to help build a factory for St-Gobain. That looks like an enrichment to me. It did so under the mistaken belief (induced by St-Gobain) that St-Gobain was under a liability to guarantee payment by the main contractor. The obvious response to such an attempt at 'leapfrogging' is to say that the subcontractor cannot be allowed to evade the risk of the main contractor's insolvency (a risk which, in this case, eventuated). But could such an argument succeed when St-Gobain had assured Actionstrength (albeit orally) that they would assume the risk of Inglen's insolvency? This may be a bit far-fetched - I look forward to someone demolishing the possibility of such a claim.