Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd

An enrichment is unjustified where it lacks a legal ground for its retention. A party seeking recompense must establish enrichment at its expense, the absence of legal justification and that equitable considerations favour redress.

There is no room for recompense where the defender has obtained and retained no more than an express contractual right provides. Accordingly, a landlord’s enrichment following enforcement of a conventional irritancy is not unjustified where the lease expressly entitles the landlord to recover possession, uplift rents and enjoy the premises free of the former tenant’s claims.

The appellants acquired the tenant’s interest in a long commercial sublease forming part of arrangements for the development of a shopping centre. Their return consisted of 22.468 per cent of rents received from occupational subtenants. After rent remained unpaid, the respondents enforced a conventional irritancy and obtained declarator, thereby ending the appellants’ interest and entitlement to the occupational rents.

The appellants subsequently sought recompense under the law of unjustified enrichment for the benefit obtained by the respondents. The Lord Ordinary rejected the claim, and a majority of an Extra Division of the Inner House agreed that the contractual terms excluded it. The central issue before the House was whether the respondents’ enrichment lacked legal justification despite arising from the express consequences of the irritancy clause.

1. Appeal dismissed unanimously. Lord Hope of Craighead delivered the leading speech. Lord Browne-Wilkinson, Lord Jauncey of Tullichettle, Lord Nolan and Lord Hoffmann agreed that the appeal should be dismissed. The respondents did not insist upon their cross-appeal.
2. Per Lord Hope, an obligation to redress unjustified enrichment arises from the absence of a legal ground for retaining the benefit, rather than from contract. A claimant seeking recompense must show that the defender was enriched at the claimant’s expense, that no legal justification existed and that it would be equitable to require redress. Repetition, restitution and recompense describe remedies for reversing enrichment according to the form of benefit and relief sought. The present claim was properly characterised as recompense because it sought payment representing the value of the benefit enjoyed.
3. Per Lord Hope, the respondents had undoubtedly been enriched at the appellants’ expense. The irritancy ended the appellants’ entitlement to retain 22.468 per cent of the occupational rents, while the respondents acquired the whole benefit of the development. Equitable considerations favoured recompense unless the contract supplied a legal justification for retaining that benefit.
4. Per Lord Hope, the contract supplied an insuperable answer. The appellants’ entitlement to the rent stream depended entirely upon the sublease. Its irritancy clause expressly provided that the tenant would forfeit all right and title, the premises would revert to the landlord, and the landlord could enter into possession, uplift rents and enjoy the premises free of the tenant’s claims. The enrichment was therefore precisely the benefit conferred by the contractual remedy. The earlier development agreement did not alter the position because the obligation to grant the sublease had been implemented and superseded by the lease. There could be no better legal justification than the exercise of an express contractual right.
5. Lord Jauncey reached the same conclusion. Consequences which flowed naturally from an irritancy clause freely accepted by the parties could not be characterised as unjust. Although the law permitted intervention where an irritancy was enforced oppressively, reasonable enforcement did not generate a subsequent claim in recompense merely because the landlord’s benefit was disproportionate to the tenant’s loss. Any reform concerning severe consequences under long investment leases was more appropriately legislative.

1. House of Lords: The appeal was dismissed unanimously: [1998] UKHL 53. The respondents did not insist upon their cross-appeal.
2. Inner House of the Court of Session: A majority of an Extra Division agreed with the Lord Ordinary that the averments supporting the unjustified-enrichment claim were irrelevant. Lord Rodger dissented.
3. Lord Ordinary: Lord Coulsfield rejected the appellants’ claim for recompense based on unjustified enrichment.