Dollar Land (Cumbernauld) Ltd v. C.I.N. Properties Ltd (Scotland)

This appeal concerned whether a tenant whose lease had been terminated under a conventional irritancy could recover by way of unjustified enrichment (recompense) the value of the income stream lost as a result of that termination. The House held that, although the landlord was enriched by enforcement of the irritancy, that enrichment was justified by the express terms of the irritancy clause (Clause 5 of the sublease) and by the contractual scheme under which the parties had contracted; accordingly the law of unjustified enrichment did not give the tenant a right to recompense. The court emphasised the distinction between an enrichment lacking legal justification and benefits obtained in the exercise of contractual rights, and concluded that the contractual allocation of risks and benefits foreclosed the restitutionary remedy sought.

The appellants (Dollar Land (Cumbernauld) Ltd) acquired Cumbernauld Development Corporation's interest in a shopping centre which had been let under a sublease to provide the appellants with a share (22.468%) of occupational rents. The sublease contained an extensive irritancy clause (Clause 5) permitting the landlord (C.I.N. Properties Ltd) to terminate the tenant's interest for non-payment of rent and to enter into possession and uplift rents without further procedure. After the appellants defaulted in payment of rent, C.I.N. gave statutory notice under section 4(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, enforced the irritancy and obtained possession and the full benefit of the occupational rents.

The appellants sought recompense under the law of unjustified enrichment for the value of the income stream they lost as a result of the irritancy. The legal issue framed was whether (i) the defenders had been enriched at the pursuers' expense, (ii) that enrichment lacked any legal justification, and (iii) it would be equitable to require redress.

The House analysed the relationship between contractual remedies and restitutionary relief. It accepted that the defenders had been enriched by the termination of the sublease but held that where the enrichment flows from and is authorised by the clear terms of a contract (here the irritancy clause and related contractual framework), the enrichment has a legal justification and restitution will not lie. The majority concluded that the contractual scheme expressly allocated the consequences of irritancy and therefore excluded the remedy of recompense. A dissenting view (Lord Rodger) considered that, on the particular factual background, the defenders' possession was enhanced in a way not contemplated by the original contractual scheme and might justify restitution; the majority rejected that analysis.

Procedural posture: the decision is a final appellate disposition following prior interlocutors and appeals in the Court of Session and an earlier House of Lords decision on the irritancy (see appellate history).

Appeal dismissed. The majority held that, although the landlord was enriched by enforcement of the irritancy, that enrichment was justified by the clear terms of the irritancy clause and the contractual scheme between the parties. Because the benefit retained by the landlord was authorised by contract, the law of unjustified enrichment did not require recompense.

Lord Ordinary granted a declarator of irritancy (decree pronounced 19 June 1990). The Inner House adhered to that interlocutor (29 May 1991). The appellants' appeal to the House of Lords on the irritancy issue was dismissed (1992 S.C.(H.L.) 104). Subsequent proceedings in the Court of Session Extra Division rejected the unjust enrichment claim as irrelevant (1996 S.C. 331). The present appeal to the House of Lords ([1998] UKHL 26) was dismissed.