McDonald v Coys of Kensington

A person is enriched where, through a mistake in implementing an agreed bargain, that person receives a valuable benefit for which they neither bargained nor paid. If the benefit is readily returnable without substantial difficulty or detriment, knowingly retaining or giving it away instead of returning it on request justifies restitution of its value.

A change of position made after the recipient knows of the mistake and the resulting claim lacks the necessary causal reliance and good faith. For contribution between persons liable for the same continuing loss, responsibility may reflect both the conduct creating the initial problem and a recipient’s subsequent refusal to restore the benefit.

The executors of a deceased vehicle owner instructed Coys, a car auctioneer, to sell a Mercedes without its personalised registration mark. Coys failed to secure a statutory right of retention before selling the car to Mr McDonald. Although the auction contract excluded the mark, the statutory registration scheme allowed Mr McDonald to register the car with it.

The executors claimed against Coys, which joined Mr McDonald under Part 20 and later settled the executors’ claim. HHJ Simpson held Mr McDonald liable for £15,000: £1,391.88 under causes of action assigned by the executors and £13,608.12 as a 100% contribution to Coys. Indemnity costs were also awarded.

The appeal concerned whether Mr McDonald had been unjustly enriched, whether giving the car to his partner established a change-of-position defence, whether a full contribution was just and equitable, and whether indemnity costs were justified.

1. Appeal dismissed. Mr McDonald was liable to the estate in unjust enrichment for the £15,000 value of the registration mark. The four relevant questions were whether he had been enriched, whether the enrichment was at the claimant’s expense, whether it was unjust, and whether a specific defence applied.

2. The statutory registration scheme did not prevent restitution. Although the scheme caused the mark to remain assigned to the vehicle, the auction contract expressly excluded it. Mr McDonald obtained the mark only because Coys mistakenly failed to secure its retention. He knew soon afterwards that the mark fell outside his bargain.

3. The mark constituted an incontrovertible benefit. Its value was readily realisable, and Mr McDonald’s conduct showed that he attached value to its possession and potential future sale. More fundamentally, the law recognises readily returnable benefits as a distinct category of enrichment. A recipient who knows that a valuable benefit was received by mistake, and who can return it without substantial difficulty or detriment, is benefited if they elect to retain or give it away instead.

4. The alleged gift of the car to Mr McDonald’s partner did not establish a change-of-position defence. Any transfer occurred after he knew of the mistake and the threatened claims. It therefore lacked causal reliance, inequity and good faith. The result would have been the same even if the gift had occurred when first suggested, because he then possessed sufficient knowledge of the mistake.

5. The court refused permission to raise a new argument about whether restitutionary and contractual liabilities concerned the same damage under the Civil Liability (Contribution) Act 1978. The issue should have been raised below, and allowing it would have radically enlarged and delayed the appeal. The judgment therefore provides no authority on the correct construction of the Act on that issue.

6. On the basis upon which the case had been conducted, both Coys and Mr McDonald were responsible for the estate’s continuing deprivation of the mark. Coys created the problem, but Mr McDonald’s refusal to return the benefit more directly perpetuated the loss. Since he received the benefit and could have avoided the proceedings by returning it, the award of a 100% contribution was unassailable.

7. The indemnity-costs order was within the judge’s discretion. Mr McDonald had acted opportunistically and had improperly conducted the litigation by denying a material conversation and challenging the truthfulness of Coys’ witnesses. Those matters took the case outside the norm.

Wilson J and Thorpe LJ agreed with Mance LJ.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously: [2004] EWCA Civ 47.

2. Mayor’s and City of London Court: HHJ Simpson entered judgment for Coys on 3 April 2003 for £15,000, comprising recovery under assigned causes of action and a 100% contribution, with indemnity costs. No citation is stated.