Lipkin Gorman (A Firm)(Original Appellants and Cross-Respondents) v Karpnale Ltd (Formerly Playboy Club of London Ltd) (Original Respondents and Cross-Appellants)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Bridge of Harwich,Lord Templeman,Lord Griffiths,Lord Ackner,Lord Goff of Chieveley
Judgment Date06 Jun 1991
Judgment citation (vLex)[1991] UKHL J0606-2

[1991] UKHL J0606-2

House of Lords

Lord Bridge of Harwich

Lord Templeman

Lord Griffiths

Lord Ackner

Lord Goff of Chieveley

Lipkin Gorman (A Firm)
(Original Appellants and Cross-Respondents)
and
Karpnale Limited (Formerly Playboy Club of London Limited) and Others
(Original Respondents and Cross-Appellants)
Lord Bridge of Harwich

My Lords,

1

I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Templeman and Lord Goff of Chieveley. I agree with their conclusion that the appeal should be allowed and the cross-appeal dismissed with the consequence that the appellants become entitled to judgment for the principal sum of ?154,695 inclusive of the sum to which the cross-appeal relates. All questions with respect to the amount of interest to be awarded on this principal sum and with respect to the costs of the proceedings must, unless the parties are able to agree, be deferred to enable counsel to make further submissions.

2

With respect to the view that prevailed in the Court of Appeal I cannot see that the respondents are in any better position to resist the appellants' claim to recover the money which Mr. Cass stole from them and gambled away in the casino by reason of the fact that cash was exchanged for gaming chips before being wagered at the gaming tables. The respondents were nevertheless mere volunteers who gave no consideration for the stolen money. This was the common sense view expressed in the dissenting judgment of Nicholls L.J. Both my noble and learned friends have thoroughly analysed this issue and I agree with the reasoning in both their speeches.

3

I agree with my noble and learned friend Lord Goff of Chieveley that it is right for English law to recognise that a claim to restitution, based on the unjust enrichment of the defendant, may be met by the defence that the defendant has changed his position in good faith. I equally agree that in expressly acknowledging the availability of this defence for the first time it would be unwise to attempt to define its scope in abstract terms, but better to allow the law on the subject to develop on a case by case basis. In the circumstances of this case I would adopt the reasoning of my noble and learned friend Lord Templeman for the conclusion that the respondents can only rely on the defence to the extent that it limits their liability to the appellants to the amount of their net winnings from Mr. Cass which must have been derived from the stolen money.

4

The respondents submitted that the appellants' claims failed on the ground that they had no title to the money which was the subject of the appeal or to the banker's draft which was the subject of the cross-appeal. The arguments in support of this submission are examined in the speech of my noble and learned friend Lord Goff of Chieveley. I agree with his reasons for rejecting them.

Lord Templeman

My Lords,

5

Cass was a partner in the appellant firm of solicitors, Lipkin Gorman ("the solicitors"). Cass withdrew ?323,222.14 from the solicitors' bank account. The sum of ?100,313.16 was replaced, recovered or accounted for, but the balance of ?222,908.48 was money which Cass stole from the solicitors and proved to be irrecoverable from him. Cass staked ?561,014.06 at the gaming tables of the Playboy Club, a licensed casino owned and operated by the respondent, Karpnale Ltd. ("the club"). Cass won ?378,294.06. After making adjustments for certain cheques, the club agreed that the club won and Cass lost overall, in a matter of months, the sum of ?174,745. The parties also agreed that the maximum gross personal resources of Cass amounted to ?20,050 and that at least the sum of ?154,695 won by the club and lost by Cass was derived from money stolen from the solicitors. The club acted innocently throughout and was not aware that the club had received ?154,695 derived from the solicitors until the solicitors claimed restitution. Conversion does not lie for money, taken and received as currency: see Orton v. Butler (1822) 5 B. & Ald. 652 and Foster v. Green (1862) 7 H. & N. 881. But the law imposes an obligation on the recipient of stolen money to pay an equivalent sum to the victim if the recipient has been "unjustly enriched" at the expense of the true owner. In Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32, 61, Lord Wright said:

"It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep."

6

The club was enriched as and when Cass staked and lost to the club money stolen from the solicitors amounting in the aggregate to ?300,000 or more. But the club paid Cass when he won and in the final reckoning the club only retained ?154,695 which was admittedly derived from the solicitors' money. The solicitors can recover the sum of ?154,695 which was retained by the club if they show that in the circumstances the club was unjustly enriched at the expense of the solicitors.

7

In the course of argument there was a good deal of discussion concerning tracing in law and in equity. In my opinion in a claim for money had and received by a thief, the plaintiff victim must show that money belonging to him was paid by the thief to the defendant and that the defendant was unjustly enriched and remained unjustly enriched. An innocent recipient of stolen money may not be enriched at all; if Cass had paid ?20,000 derived from the solicitors to a car dealer for a motor car priced at ?20,000, the car dealer would not have been enriched. The car dealer would have received ?20,000 for a car worth ?20,000. But an innocent recipient of stolen money will be enriched if the recipient has not given full consideration. If Cass had given ?20,000 of the solicitors' money to a friend as a gift, the friend would have been enriched and unjustly enriched because a donee of stolen money cannot in good conscience rely on the bounty of the thief to deny restitution to the victim of the theft. Complications arise if the donee innocently expends the stolen money in reliance on the validity of the gift before the donee receives notice of the victim's claim for restitution. Thus if the donee spent ?20,000 in the purchase of a motor car which he would not have purchased but for the gift, it seems to me that the donee has altered his position on the faith of the gift and has only been unjustly enriched to the extent of the secondhand value of the motor car at the date when the victim of the theft seeks restitution. If the donee spends the ?20,000 in a trip round the world, which he would not have undertaken without the gift, it seems to me that the donee has altered his position on the faith of the gift and that he is not unjustly enriched when the victim of the theft seeks restitution. In the present case Cass stole and the club received ?229,908.48 of the solicitors' money. If the club was in the same position as a donee, the club nevertheless in good faith allowed Cass to gamble with the solicitors' money and paid his winnings from time to time so that when the solicitors' sought restitution, the club only retained ?154,695 derived from the solicitors. The question is whether the club which was enriched by ?154,695 at the date when the solicitors sought restitution was unjustly enriched.

8

The club claims that the club gave consideration for the sum of ?154,695 by allowing Cass to gamble and agreeing to pay his winnings and therefore the club was not enriched or, alternatively, was not unjustly enriched. The solicitors claim that the club acquired ?154,695 under void contracts and that as between the club and the solicitors from whom the money was derived, the club is in no better position than an innocent donee from the thief, Cass. The resolution of this dispute depends on the true construction of section 18 of the Gaming Act 1845, an analysis of the relationship between the club and Cass and the consideration of the authorities dealing with gaming and the authorities dealing with unjust enrichment.

9

Section 18 of the Gaming Act 1845 , so far as material, provides:

"all contracts or agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void; and that no suit shall be brought or maintained in any court of law or equity for recovering any sum of money or valuable thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person to abide the event on which any wager shall have been made …"

10

The club contends that the club received money from Cass under a contract with him which was not a contract "by way of gaming or wagering" and is not rendered null and void by section 18 of the Act of 1845. Alternatively, even if the club received the money under a contract by way of gaming nevertheless, it is argued, the club was not unjustly enriched because, in the belief that the money tendered by Cass was his own personal money, the club accepted the money and altered the position of the club to the detriment of the club by allowing Cass to gamble and by paying his winnings when he won; the club, it is said, was enriched, but not unjustly enriched, and may retain the money which the club fairly and lawfully won. It is well settled that section 18 of the Act of 1845 does not enable a gambler to recover money which he has lost and paid.

11

The club was a proprietary club and Cass was a member. Cass was not bound to gamble but if he contemplated doing so he was bound to advance cash. Cass could pay cash to the club cashier. In return for cash the cashier issued credit vouchers with a face value equal to the money received. If Cass tendered a credit voucher to a croupier at a gaming table, Cass would be issued...

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2 firm's commentaries
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