What's it worth?

What's it worth?

Published:

Author: Sarah Ingram

We consider the principle of unjust enrichment in light of the recent Supreme Court decision in Benedetti v Sawiris and others [2013] UKSC 50.

A defendant may be enriched through the performance of work, provision of goods or services where those goods, services or work were freely accepted or requested by the defendant.

Unjust enrichment becomes relevant where one party has unfairly profited at the expense of the other. The law seeks to reverse that unfair profit.   

Following the case of Banque Financiere de la Cite v Parc (Battersea) Ltd [1998] UKHL 7, the court will consider the following factors in an unjust enrichment claim: ·        

  • Has the defendant been enriched?      
  • Is the enrichment at the claimant's expense?       
  • Is the enrichment unjust?         
  • Does the defendant have any defences to the claim?  

A successful claimant needs to show that the defendant has received some kind of benefit - the 'enrichment' - at the claimant's expense, and that this was unfair - 'unjust'.  For example, in circumstances where a contract has failed to come into existence, or the contract is or becomes void or unenforceable, the law will say it is nevertheless right and fair that work done or goods supplied should be paid for.   

Valuation

In order to value the unjust enrichment the court will look at the value of the defendant's gain, valued at the point when he made the gain. It is important to remember such a claim is not one to pay compensation to the claimant.  

Where services have been provided the court will look to make an award on the basis of what is deserved, or what the job is, known as valuation on a quantum meruit basis. This will be a reasonable amount by reference to objectivity and general market conditions, looking at the value of the services themselves, not taking into consideration any end product or eventual profit.   

The recent Supreme Court decision in Benedetti provides a valuable insight into how the principle of unjust enrichment is applied by the court in practice.  

Benedetti involved the acquisition of the wholly owned subsidiary of the largest energy company in Italy. The court considered how the unjust enrichment should be valued.  

The court confirmed that where there was no valid or enforceable contract, the starting point is to consider what a reasonable person in the defendant's position would pay for the work, goods or services.  

Market value?

The court held that market conditions are not the only factor to be taken into account.   

In circumstances where the defendant did not value the services as highly as the market place would, the court decided that it was permissible to take the defendant's subjective perspective into account, using the principle of 'subjective devaluation'.  

However, when considering whether the principle of subjective devaluation could work in reverse, i.e. whether the defendant could be ordered to pay more than objective market value for the services if he was found to have valued them particularly highly - 'subjective revaluation' -,  the court held this should not be recognised except in exceptional circumstances.  

What should you do?

Before you provide work, services or goods make sure a valid, enforceable contract is in place.

If you fail to do so you may be faced with difficulties valuing those commodities if an unjust enrichment claim arises in the future.  

If you are in any doubt about what to do, seek legal advice.