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The use value of money in the law of unjust enrichment

Published online by Cambridge University Press:  02 January 2018

Man Yip
Man Yip*
Affiliation:
Singapore Management University
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Abstract

In Sempra Metals Ltd v Inland Revenue Commissioners, the House of Lords, by a majority, recognised the right to recover compound interest for the ‘use value of money’, an independent benefit from the principal sum. This right is based in the principle of unjust enrichment. Nevertheless, the House of Lords could not agree on the proper understanding of ‘use value of money’ and left many important questions unaddressed which are crucial for paving the way forward for a claim for the ‘use value of money’. This paper will meet the following challenges – to justify the majority's position in Sempra Metals in recognising a right to compound interest for the ‘use value of money’; deal with the theoretical basis of ‘use value of money’; and recommend a model as the way forward for this newly recognised claim.

Type
Research Article
Information
Legal Studies , Volume 30 , Issue 4 , December 2010 , pp. 586 - 609
Copyright
Copyright © Society of Legal Scholars 2010

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References

1. [2007] UKHL 34, [2007] 3 WLR 354.

2. Metallgesellschaft Ltd v Inland Revenue Commissioners (Joined Cases C-397 and 410/98) [2001] Ch 620.

3. Sempra, above n 1, at 368 and 373,per Lord Hope; at 409 per Lord Walker.

4. Ibid, at 391 and 398 per Lord Scott; at 432 per Lord Mance.

5. Ibid, at 373 per Lord Hope; at 388 per Lord Nicholls.

6. Ibid, at 431–432.

7. Ibid, at 388.

8. Ibid, at 387–388.

9. Ibid, at 387 per Lord Nicholls, referring to his own speech in AG v Blake[2001] 1 AC 268 at 278 (Blake).

10. See text to nn 63 and 64 below.

11. Sempra, above n 1, at 390.

12. Walker v Constable (1798) 1 B&P 306; De Havilland v Bowerbank (1807) 1 Camp 50; Depcke v Munn (1828) 3 Car & P 112; Fruhling v Schroeder (1835) 2 Bing N C 77; and Johnson v The King[1904] AC 817.

13. BP Exploration Co (Libya) Ltd v Hunt (No 2)[1979] 1 WLR 783 at 836–837 per Robert Goff J.

14. [1996] AC 669.

15. Ibid, at 717–718 per Lord Browne-Wilkinson; at 718–719 per Lord Slynn; at 740–741 per Lord Lloyd.

16. Sempra, above n 1, at 367 per Lord Hope; at 385 per Lord Nicholls; at 406–408, per Lord Walker, explaining the Walker v Constable line of cases. Lord Mance was not persuaded by this explanation: Sempra, above n 1, at 422.

17. (1760) 2 Burr 1005.

18. Sempra, above n 1, at 406–407.

19. Rodger v The Comptoir D'Escompte de Paris (1871) LR 3 PC 465; Nykredit Mortgage Bank Ltd v Edward Erdman Group Ltd (No 2)[1997] 1 WLR 1627 and Australian cases: Heydon v NRMA Ltd (No 2) (2001) 53 NSWLR 600; Cornwall v Rowan (No 2)[2005] SASC 122.

20. Johnson v The King[1904] AC 817 at 822.

21. (1945) 70 CLR 293 at 309–310.

22. [1979] 1 WLR 783 at 836–837; aff'd [1981] 1 WLR 232 (CA); aff'd [1983] 2 AC 352 (HL) 373.

23. Sempra, above n 1, at 387.

24. Law Commission Law of Contract – Report on Interest Law Com No 88 Cm 7229, 1978 at para 85, also see recommendation in relation to reforming s 3 of 1934 Act, at paras 153–156.

25. Ibid, para 85.

26. Ibid, paras 65–66.

27. Ibid, paras 65–66.

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29. Sempra, above n 1, at 423.

30. Hansard HL Deb, vol 430, cols WA429–433, 14 May 1982.

31. Mason CJ and Wilson J took a similar line of reasoning in Hungerfords v Walker (1989) 171 CLR 125 at 148 in interpreting statutory materials similar to s 35A in the context of a claim for interest as compensation.

32. Sempra, above n 1, at 386 per Lord Nicholls.

33. Ibid, at 411.

34. Ibid.

35. Ibid, at 435–436.

36. Ibid, at 411.

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38. Lord Nicholls raised the issue of ‘at the expense of’ only on the last day of the hearing.

39. Sempra, above n 1, at 387.

40. See discussion under (c) (The ‘user principle’) below.

41. Lords Scott and Mance were of the view that the ‘use value of money’ refers to the interest earned on the principal sum; see Sempra, above n 1, at 391 and 396 per Lord Scott; at 432 per Lord Mance.

42. Ibid, at 384.

43. Birks, above n 37, pp 11–16.

44. Eg, Attorney-General v Blake[2001] 1 AC 268 (Blake).

45. See M McInnes ‘Interceptive subtraction, unjust enrichment and wrongs – a reply to Professor Birks’ (2003) 62 CLJ 697; Birks, above n 37, ch 4.

46. McInnes, ibid; R Grantham and C Rickett, ‘Disgorgement for unjust enrichment?’ (2003) 62 CLJ 159.

47. Sempra, above n 1, at 367 per Lord Hope; at 433 per Lord Mance.

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51. (1776) 1 Cowp 371.

52. McInnes, above n 50.

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54. Rush, above n 48, pp 150–153: Dr Rush is not persuaded by the argument of McInnes based on conservation of judicial resources.

55. L Smith ‘Tracing into the payment of a debt’[1995] CLJ 290 at 292–293.

56. Ibid, at 293.

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59. Edelman and Bant described this as a subtraction ‘from the [claimant's] dominion as opposed to the [claimant's] wealth’: ibid, p 130.

60. Ibid, p 141.

61. Whitwham v Westminster Brymbo Coal and Coke Company[1896] 2 Ch 538 at 543 per Rigby J.

62. Blake, above n 44, at 278.

63. M McInnes ‘Gain, loss and the user principle’[2006] RLR 76 at 79.

64. McInnes has explained that ‘legal responses must be identified on the basis of purposes rather than effects’: ibid, at 78–79.

65. Inverugie Investments Ltd v Hackett[1995] 1 WLR 713 at 718 per Lord Lloyd; Blake, above n 44, at 279 per Lord Nicholls; at 298 per Lord Hobhouse; World Wide Fund for Nature v World Wrestling Federation Entertainment Inc[2007] EWCA Civ 286, [2008] 1 WLR 445 at 458–475 per Chadwick LJ (who gave a comprehensive review of the existing case-law).

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68. Ibid, pp 83 and 86.

69. C Rotherham ‘The conceptual structure of restitution for wrongs’ (2007) 66 CLJ 172 at 173.

70. Ibid, at 176–178.

71. Edelman, above n 66, p 67.

72. Ibid.

73. [1995] 1 WLR 713 at 718.

74. Blake, above n 44, at 279; See McInnes' detailed analysis of Lord Nicholls' speech in support of this interpretation in McInnes, above n 63, at 79–83.

75. Above n 65, at 475.

76. Sempra, above n 1, at 387.

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81. McInnes, above n 63.

82. McInnes, above n 50: McInnes applied the same ‘economic loss’ analysis for both the ‘user principle’, to justify a compensatory account, and for unjust enrichment, in defence of the correspondence of loss and gain theory.

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86. Ibid, p 62.

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88. [1900] AC 113.

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91. Ibid, pp 306–319.

92. Ibid, p 332, also see pp 329–340.

93. (1703) 2 Ld Raym 938.

94. Representations of the People Act 1985.

95. McGreggor, H McGreggor on Damages (London: Sweet & Maxwell, 17th edn, 2003)Google Scholar at para [7-006].

96. Burrows, above n 89, pp 374–375.

97. Birks, above n 37, p 39.

98. M McInnes ‘Enrichment revisited’ in Neyers, J, McInnes, M and Pitel, S (eds) Understanding Unjust Enrichment (Oxford: Hart Publishing, 2004)Google Scholar ch 8, p 167.

99. Birks, above n 37, p 53.

100. Ibid.

101. McInnes, above n 98, pp 185–186.

102. Please see statistics in relation to the government balance of payments, current account published online by the Office for National Statistics, available at <http://www.statistics.gov.uk>.

103. Birks, above n 37, pp 60–61.

104. Ibid, p 60.

105. McInnes, above n 98, p 186.

106. Birks, P Introduction to the Law of Restitution (Oxford: Clarendon Press, revised edn, 1989) p 109 Google Scholar; Ministry of Defence v Ashman (1993) 2 EGLR 102 at 105 per Hoffmann LJ.

107. Birks, ibid, p 109; Birks, above n 37, p 54.

108. Birks, Introduction, ibid, p 110.

109. McInnes, above n 98, p 175, fn 44.

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111. Virgo, above n 78, pp 66–67.

112. McInnes, above n 98, p 175.

113. Birks, above n 37, p 55; Edelman and Bant, above n 57, pp 107–117.

114. McInnes, above n 98, p 175, n 43.

115. Weatherby v Banham (1832) 172 ER 950 is reconcilable with the notion of acceptance coupled with notice that the benefit is not rendered for free. First, the Racing Calendar was addressed to one W whom the defendant knew was deceased. Secondly, it is arguable that the Racing Calendar was not the type of periodical that one would reasonably expect to be supplied gratuitously. Therefore, unless the publisher was informed of W's death, payment would be due. The claim was for the price of 2 years' supply and it was noted in the judgment that there was no evidence that the defendant had offered to return them.

116. Eg, Rowe v Vale of White Horse District[2003] 1 Lloyd's Rep 418.

117. In Pollock, CB's words in Taylor v Laird (1856) 25 LJ Ex 329 at 322: ‘[t]he benefit of the service could not be rejected without refusing the property itself’.

118. Sempra, above n 1, at 373.

119. R Stevens ‘Three enrichment issues’ in Burrows, A and Rodger, Lord of Earlsferry (eds) Mapping the Law: Essays in Memory of Peter Birks (Oxford: Oxford University Press, 2006) p 53 CrossRefGoogle Scholar. Cf McInnes, above n 98, p 177: McInnes argued that the existence and extent of the enrichment must be distinguished and that subjective devaluation in respect of the latter is possible.

120. (1993) 2 EGLR 102.

121. Jones, G (ed) Lord Goff of Chieveley and G Jones: The Law of Restitution (London: Sweet & Maxwell, 7th edn, 2007).Google Scholar

122. [1991] 2 AC 548 at 580.

123. [2006] UKPC 17.

124. Sempra, above n 1, at 373.

125. Tapper, C Cross and Tapper On Evidence (New York: Oxford University Press, 11th edn, 2007) p 141.Google Scholar

126. Ibid, p 169.

127. Lipkin Gorman, above n 122, at 580 per Lord Goff.

128. R Grantham and C Rickett ‘A normative account of defences to restitutionary liability’ (2008) 67(1) CLJ 92.

129. Ibid, at 122.

130. Ibid, at 121.

131. Lipkin Gorman, above n 122, at 580.

132. Birks, above n 37, pp 208–212; Burrows, Restitution, above n 110, p 510.

133. Grantham and Rickett, above n 128, at 121.

134. Cf Canadian law –RBC Dominion Securities Inc v Dawson (1994) 111 DLR (4th) 230. The defendant remained enriched to the extent of the furniture in her possession but she succeeded in pleading the defence of change of position.

135. Commerzbank AG v Price-Jones[2003] EWCA Civ 1663, (2003) 147 SJLB 1397 per Munby J.

136. Grantham and Rickett, above n 128, at 121; A Burrows ‘Clouding the issues on change of position’[2004] CLJ 276 at 279–280.

137. Edelman and Bant, above n 57, p 322.

138. (1857) 27 LJ Ex 117.

139. Virgo, above n 78, p 67. To note, the claim was brought in contract and no restitutionary claim was pleaded.

140. Shogun Finance Ltd v Hudson[2003] UKHL 62, [2004] 1 AC 919 at 957–958.

141. Bank of America Canada v Mutual Trust Co.[2002] SCC 43.

142. Birks, above n 37, pp 260–261.

143. Above n 135.

144. Lipkin Gorman, above n 122, at 579.

145. This seems to be the approach preferred by Lords Hope and Nicholls in Sempra.

146. See Edelman, J and Cassidy, D Interest Awards in Australia (Chatswood: LexisNexis Butterworths, 2003)Google Scholar ch 5 at para 5.8.

147. Lexane Pty Ltd v Highfern Pty Ltd (1985) 1 QD Rep 446 at 461–462.

148. British Columbia v Cressey Development Corp (1992) 97 DLR (4th) 380 at 382.

149. Sempra, above n 1, at 390.

150. Mason, K and Carter, J Restitution Law in Australia (Chatswood: Butterworths, 1995)Google Scholar para 2807.