TFL Management Services Ltd v Lloyds Bank Plc

A claim in unjust enrichment cannot be summarily dismissed merely because the claimant conferred a benefit while mistakenly pursuing its own interests. The proposed general exception for incidental benefits was insufficiently clear to justify summary dismissal. The established questions of enrichment, enrichment at the claimant’s expense, unjustness and available defences provide the appropriate framework.

A relevant mistake need not have been induced by the recipient. Indirect enrichment requires consideration of causal connection, double recovery, contractual allocation and the distinction between restitution and compensation. These considerations are flexible. A saving in irrecoverable litigation and receivership costs may constitute enrichment. Its existence and extent, together with any assumption of risk, may require findings at trial.

Explora Group Ltd acquired assets from the administrative receivers of The Trading Force Ltd. Lloyds Bank Plc held security over that company’s assets. The sale agreement transferred certain agency contracts but excluded book debts as retained assets.

Explora pursued proceedings against Hesco Bastion Ltd for commissions which it believed had been assigned to it. Following a first-instance decision, [2004] EWHC 1863 (QB), the Court of Appeal held that the disputed accrued commissions were retained book debts: [2005] EWCA Civ 646. The receivers subsequently recovered money from Hesco, which passed to the Bank under its security.

TFL Management Services Ltd acquired Explora’s rights to claim against the Bank. It alleged that Explora’s expenditure on the earlier litigation, incurred under a mutual mistake about the assignment, had benefited the Bank by simplifying recovery of the commissions. HHJ Pelling QC summarily dismissed the unjust enrichment claim as concerning an incidental benefit: [2013] EWHC 772 (Ch). A contractual claim remained for trial.

TFL appealed. The Bank supported the incidental-benefit ground and advanced alternative grounds addressing every element of unjust enrichment. The central issue was whether the claim had a realistic prospect of success on the assumed facts.

Appeal allowed by a majority, Floyd and Beatson LJJ agreeing, Sir Stanley Burnton dissenting.

1. The proposed incidental-benefit exception provided no secure foundation for summary dismissal. Neither party’s formulation derived from an English authority. The various explanations offered for denying restitution of incidental benefits could generally be addressed through the established unjust enrichment framework. Ruabon Steamship Ltd. v London Assurance Company Limited offered limited assistance in formulating a modern exception. Becerra and another v Close Brothers Corporate Finance Ltd. had proceeded on a concession (paras 28–45).

2. Self-interest did not exclude restitution where services were rendered under a mistake. Greenwood v Bennett demonstrated that the mistake need not have been induced by the recipient or accompanied by knowing acquiescence. Recovery also could not be excluded simply because the benefit received differed from the benefit the claimant intended to obtain (paras 42–45, 67, 88).

3. The arguable enrichment was a saving in the costs of recovering the commissions, rather than the commissions themselves. Issue estoppel could have enabled the receivers to pursue a simpler claim with fewer irrecoverable legal costs and lower receivership charges. The existence and extent of that saving required evidence. Explora’s expenditure was not itself the measure of the Bank’s enrichment (paras 47–50, 83).

4. The alleged benefit was indirect. The considerations identified in Investment Trust Companies (in liquidation) v HMRC were relevant but flexible. An adverse consideration did not automatically defeat recovery. Delay between judgment and settlement did not establish an insufficient causal connection. Failure to seek a costs order or rectification did not itself defeat the claim. The claim was at least arguably independent of the earlier costs order. The contractual allocation was also not decisive because Explora alleged that its work exceeded its contractual obligations (paras 51–65).

5. The application assumed a mutual mistake about the assignment. Whether Explora had knowingly assumed the relevant risk required factual investigation. Neither self-interest, lack of encouragement nor the Bank’s lack of control over expenditure conclusively answered unjustness. The claim therefore carried sufficient conviction to survive summary judgment. This decided neither liability nor valuation (paras 66–70, 87–89).

6. Sir Stanley Burnton would have dismissed the appeal. He considered the costs claim an attempt to circumvent the earlier court’s costs jurisdiction. The commissions were contractually due to the receivers, and the declaratory judgment created no entitlement. Without rectification, retaining those commissions involved no injustice. He also regarded the absence of an identifiable valuation standard as indicating the absence of a justiciable claim (paras 71–77).

• Court of Appeal (Civil Division): [2013] EWCA Civ 1415 . Allowed TFL’s appeal by a majority of 2–1 and reversed summary dismissal of the unjust enrichment claim.
• High Court, Chancery Division: HHJ Pelling QC, [2013] EWHC 772 (Ch). By an order dated 28 February 2013, summarily dismissed the unjust enrichment claim on the assumed pleaded facts. The contractual claim remained for trial.