Argyle UAE Ltd v Par-La-Ville Hotel And Residences Ltd & Ors

Where money is paid under a contract and the contractual performance for which it was paid is wholly absent, the payer may seek restitution for total failure of consideration. Preparatory negotiations do not amount to part performance unless the contract makes them part of the duties for which payment is due.

A claim in unjust enrichment is not defeated by the absence of a direct payment where agency or a connected series of transactions makes the payment legally equivalent to a direct transfer. Contractual allocation of risk does not prevent restitution following total failure of consideration.

Argyle UAE Ltd and Robert McKellar appealed against an order of the High Court, reported at [2017] EWHC 1915 (Ch), striking out their defence and granting summary judgment on claims for restitution of US$12.5 million.

The claims arose from payments made under a Trade and Profit Share Agreement, under which Argyle was to use a credit facility for financial trading and generate profits for the respondents. No trades or profits were produced. The central issues were whether there had been total failure of consideration, whether the payments were sufficiently direct, whether contractual risk allocation barred restitution, and whether the defence to Argyle’s claim disclosed any arguable basis for retaining the money.

1. Appeal dismissed. The order striking out the defence and granting summary judgment for the respondents was upheld.
2. The contractual consideration for the US$12.5 million fee was the acquisition and resale of financial instruments using the credit facility so as to generate profits. The credit’s availability was not itself the contractual performance for which the fee was payable. Preparatory negotiations and meetings were likewise outside the remunerated contractual duties. Since no trade was executed, there was a total failure of consideration: the payer had received none of the performance bargained for. Stocznia Gdanska SA v Latvian SS Co [1998] 1 WLR 574 was applied on the distinction between receiving a specific benefit and performance of contractual duties for which payment is due.
3. The US$375,000 payment did not vary the agreement or constitute part performance. The pleaded case that it replaced the US$18 million obligation was commercially implausible and contradicted by contemporaneous documents repeatedly acknowledging that the US$18 million remained due.
4. The absence of a direct payment from PLV or the trustees did not defeat the unjust enrichment claim. Applying the exceptions recognised in Investment Trust Companies v Revenue and Customs Commissioners [2017] UKSC 29; [2018] AC 275, the trustees acted as PLV’s agents and the intermediated payments were legally equivalent to direct payments. Alternatively, the agreements and payments formed one connected transaction. The appellants’ asserted entitlement to retain the money as remuneration or directors’ loans was unsupported and unsustainable.
5. The contractual risk-allocation principle discussed in MacDonald, Dickens & Macklin v Costello [2011] EWCA Civ 930 did not apply. That principle concerns a contract performed by one party where payment is sought from a non-contracting third party; this case involved payment under a contract whose consideration totally failed.
6. Argyle’s alternative claim also justified summary judgment. The defence merely alleged that Argyle directed payment to Argyle UAE, without explaining why either appellant could retain the money against Argyle after no trades were conducted. The burden of proof was not reversed, and there was no compelling reason for a trial.

• Court of Appeal (Civil Division) — appeal dismissed; the order of the High Court was upheld: [2018] EWCA Civ 1762.
• High Court of Justice, Chancery Division — Roger Wyand QC, sitting as a Deputy High Court Judge, struck out the defence and entered summary judgment for the respondents: [2017] EWHC 1915 (Ch).