TFL Management Services Ltd v Lloyds Bank Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Sir Stanley Burnton,Lord Justice Beatson |
| Judgment Date | 14 November 2013 |
| Neutral Citation | [2013] EWCA Civ 1415 |
| Docket Number | Case No: A3/2013/0921 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 November 2013 |
[2013] EWCA Civ 1415
Lord Justice Beatson
Lord Justice Floyd
and
Sir Stanley Burnton
Case No: A3/2013/0921
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HIS HONOUR JUDGE PELLING QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Harris (instructed by Charles Fussell & Co LLP) for the Appellant
Gerard McMeel and Neil Levy (instructed by CMS Cameron McKenna) for the Respondent
A spends money seeking a judgment for the recovery of a debt from B. A fails to recover the debt because, so the court holds, the debt is not in fact owed by B to A (as A mistakenly thought), but owed by B to C. C then recovers the debt, relying on the judgment in A's unsuccessful claim. The question raised in this appeal is whether A has a claim based on unjust enrichment against C, enabling him to recover the money expended on obtaining the judgment.
In an order dated 28 February 2013, His Honour Judge Pelling QC, sitting as a judge of the High Court, summarily dismissed the claim of TFL Management Services Ltd ("TFL") against Lloyds TSB Bank PLC ("the Bank"). Summary judgment in favour of the Bank was entered on the ground that, assuming the facts to be as pleaded by TFL, it could not succeed. This, the judge found, was because any benefit conferred on the Bank was an "incidental benefit" and incidental benefits did not found a claim in unjust enrichment. TFL appeals against that order with permission of Aikens LJ.
The assumed facts can be summarised as follows. The underlying dispute concerned the entitlement of a company, The Trading Force Ltd ("TTF"), to commission from Hesco Bastion Ltd ("Hesco") in respect of sales of "gabions". Gabions are gigantic bags used for filling with earth or other local materials and then used for fortification and military engineering. TTF and Hesco entered into a general agency agreement in 1995 and in 1998 a specific one relating to supplies to the United States Defense Supply Centre Columbus, Ohio ("the general agency" and "the DSCC agreement" respectively). The Bank was the holder of a debenture on TTF's assets and, on 10 April 2002, appointed administrative receivers over it pursuant to its charge. On 30 April 2002, by means of a Chargee Sale of Assets Agreement ("the CSA agreement") the receivers assigned the assets of TTF, including the "marketing contracts" and "sale contracts" but excepting defined "retained assets", to Explora Group Ltd ("Explora"). The "marketing contracts" and "sale contracts" included TTF's contracts with named parties, including Hesco, and therefore the general agency and the DSCC agreement. But, by sub-paragraph (c) of the definition of "retained assets" in the CSA agreement, "book debts" qualified as "retained assets".
Over the next fourteen and a half months, there were exchanges between Explora and Hesco, TTF went into liquidation, Explora became a public limited company, TTF, acting by its receivers, issued proceedings against Hesco claiming an account of what was due to it from Hesco and, on 13 June 2003, Explora issued proceedings for commission payable by Hesco in respect of all contracts entered into by Hesco with TTF from 30 April 2002 (the " Explora v Hesco proceedings"). In early 2004, TTF was joined as a second defendant to the Explora v Hesco proceedings, but took no active part in the proceedings until after the substantive hearing of the appeal to the Court of Appeal.
On 28 July 2004 Simon J held ( [2004] EWHC 1863 (QB)) that the purported assignment of the two agreements to Explora amounted to repudiatory breaches of those agreements, which Hesco was entitled to and did terminate on 14 June 2002, but that termination did not affect TTF's accrued rights to commissions before that date and that accrued right was validly assigned to Explora. Explora was, accordingly, entitled to commissions in respect of sales made between the date of the assignment and the expiry of the agreements.
On the ensuing appeal, the Court of Appeal identified 10 issues which arose between Hesco as principal and Explora as assignee. Issue 8(a) was whether TTF's right to commission was assigned to Explora under the CSA agreement, or whether it was retained by the receivers of TTF. In a judgment handed down on 20 July 2005, the Court of Appeal ( [2005] EWCA Civ 646) held that Explora was not entitled to commissions under the DSCC agreement at all, and was only entitled to commission under the general agency in respect of commissions falling due after 30 April 2002. Under the terms of the assignment by the receivers to Explora, the right to commissions under the DSCC agreement had accrued at the date of that agreement, so all the rights to those commissions qualified as "book debts" and therefore were covered by the exclusion from the assignment of "retained assets".
Hesco's appeal was therefore, in substance, allowed. Explora was, however, granted a declaration that it was entitled to commissions on non-DSCC orders arising from enquiries after 30 April 2002 (the date of the assignment) and before 14 June 2002 (the date of termination) and an account and payment of commissions due. The Court of Appeal directed that " any claim which [TTF], acting by its Receivers or Liquidator, may wish to bring against Hesco as a result of the judgment … shall be dealt with by the Commercial Court" and made certain directions as to how any such claim should proceed. The receivers of TTF were represented at the hearing after judgment and made an application for the costs of a hearing on 15 July 2005, before judgment was handed down: those costs were reserved to the Commercial Court.
The Court of Appeal also made orders for costs as between Explora and Hesco. No order for payment of any costs was made either in favour of or against TTF. Further, it does not appear that any application was made by Explora for its costs against the receivers. Explora say, but the Bank does not admit, that Explora's costs of the Explora claim were £550,000 exclusive of VAT.
Following the decision of the Court of Appeal and pursuant to the directions given in its order, the receivers of TTF issued proceedings in the Commercial Court against Hesco. Ultimately, in February 2008 the receivers settled the claim in return for payment of £1,182,861.20 from Hesco and payment of their costs. Pursuant to their debenture the Bank recovered those funds.
On 2 April 2007 Explora went into administration. On 17 March 2008 Explora assigned certain rights, including a claim to rectify the CSA agreement to Almajmou'a Alistikahafieh Liltijara Ltd ("AAL"). On 28 March 2008 Explora went into creditors' voluntary liquidation.
In July 2011 further assignments of Explora's rights took place. These included an assignment to AAL of Explora's right to bring claims against the Bank, and an assignment by AAL to TFL, the claimant in this action, of that right. TFL, as assignee of Explora's rights, commenced this action against the Bank on 11 July 2011.
TFL's pleaded claim against the Bank includes a claim for breach of the CSA agreement. It is common ground that the contract claim will go to trial and we are not concerned with it on this appeal, save to the extent that we should be conscious that summary dismissal of the unjust enrichment claim will not bring the proceedings to an end unless it provokes a settlement. The unjust enrichment claim, again as pleaded, is based on the following main factual allegations:
i) Throughout the Explora v Hesco proceedings Explora mistakenly believed that the benefit of the agreements with Hesco had been assigned to Explora;
ii) At all material times the Bank (and/or the receivers as agents for the Bank) mistakenly believed that the benefit of the agreements with Hesco had been assigned to Explora;
iii) Because of the "mutual mistake" Explora incurred the costs of the Explora v Hesco action in the sum of £550,000.
iv) Accordingly Explora conferred a valuable benefit on the Bank and the Bank was unjustly enriched at the expense of Explora.
The judgment
The core of the reasoning of HHJ Pelling QC can be summarised as follows. He recorded the submission of counsel for Explora that the "benefit" which had enriched the Bank was either the final and binding judgment of the Court of Appeal which created an issue estoppel as between Hesco and at least the receivers of TTF or, in the alternative, the legal costs which Explora had expended, as these were costs which the Bank would otherwise have had to spend to recover the book debts. He then recorded the fact that the Bank accepted in principle that the provision of services that conferred an incontrovertible benefit was capable of amounting to the necessary enrichment. However, the judge went on to say that there were limits to that principle. Relying on Ruabon Steamship Ltd. v London Assurance Company Limited [1900] AC 6; ( Becerra and another v Close Brothers Corporate Finance Ltd. unreported 25 June 1999); Goff & Jones: The Law of Unjust Enrichment (8 th Edition) at paragraphs 4.52 and 4.53; and Burrows: A Restatement of the Law of Unjust Enrichment (2012) at paragraph 8(4), he concluded that there was a rule that "incidental benefits", which the benefit to the Bank was an example of, do not support a claim in unjust enrichment.
Basing himself on these authorities, the judge concluded that Explora's claim was unarguable, whether put on the basis of the legal fees which the Bank would otherwise...
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