Dollar Land (Cumbernauld) v CIN Properties

The appellants (DLC) sought compensation under the law of unjustified enrichment for loss suffered when a conventional irritancy clause in a sublease was enforced following non-payment of rent. The House held that, although enforcement of irritancy had enriched the respondents (CIN), that enrichment was justified by the clear contractual terms of the sublease (clause 5) and by the contractual scheme under which the parties had arranged their respective interests. Consequently there was no room for a remedy in unjustified enrichment or recompense where the benefit retained by the landlord did no more than what the contract plainly provided for. The court therefore dismissed the appeal. The decision stressed that oppressive enforcement is a distinct issue, and that concerns about harsh results are for legislative reform rather than creating a new restitutionary obligation contrary to the parties' agreed terms.

The appellants purchased CDC's interests in a shopping centre which, by earlier agreement, had been the subject of a head lease to CIN and a sublease to CDC (later assigned to DLC). The commercial arrangement provided that CIN's entitlement to rents was a specified proportion of the occupational rents (the "landlord's equity proportion"). Clause 5 of the sublease was an irritancy (forfeiture) clause providing that, on default (including non-payment of rent), the tenant would forfeit all rights, possession would revert to the landlord and the landlord could uplift rents and enjoy the premises free of claims.

DLC defaulted in payment; CIN gave statutory notice under section 4(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 and thereafter obtained a declarator of irritancy. DLC sued for recompense in unjustified enrichment for the value of the benefit which CIN obtained by enforcement of the irritancy, contending the enrichment was disproportionate and unjust in all the circumstances.

The court framed the issues as:

• whether CIN had been enriched by enforcement of the irritancy (the court accepted that they had been);
• whether that enrichment was unjust because it lacked a legal ground to justify retention; and
• whether it would be equitable to compel CIN to make recompense despite the contractual allocation of risks and benefits.

The House held that the contractual scheme and the express terms of the irritancy clause provided the legal basis justifying CIN's retention of the benefit. The rent-sharing arrangement and clause 5 made clear the consequences of default; the enrichment was therefore not unjust in the law of unjustified enrichment. The majority rejected the submission that equitable considerations or the wider contractual background (the 1979 development agreement) created an independent restitutionary obligation. A dissenting view (Lord Rodger) thought the factual configuration produced an enhanced form of enrichment which might be unjustified, but the majority conclusion prevailed. The court noted concerns about harsh results from irritancy clauses but considered reform a matter for Parliament rather than creation of a restitutionary remedy contrary to the contract.

Nature of claim: claim for recompense in unjustified enrichment following enforcement of a contractual irritancy clause. Issues decided: whether contractual entitlement excludes unjust enrichment remedy; whether restoration or recompense is available where irritancy is enforced according to its terms. Reasoning: enrichment alone is insufficient; enrichment must be unjust because lacking legal justification — here the contract furnished that justification.

Appeal dismissed. The House held that although enforcement of the irritancy enriched CIN, that enrichment was justified by the express contractual terms (clause 5 of the sublease) and by the contractual scheme under which the parties had arranged their rights; therefore DLC could not recover by way of unjustified enrichment or recompense. Observations about potential harshness of irritancy clauses were noted but any reform was for Parliament.

Lord Ordinary granted decree of declarator of irritancy (19 June 1990). Inner House (Extra Division) adhered to that interlocutor (29 May 1991) and dismissed DLC's challenge. DLC appealed to the House of Lords and their earlier appeal on related issues was dismissed by the House in 1992; this appeal to the House of Lords was dismissed on 16 July 1998. Neutral citation for this judgment: [1998] UKHL 53.