School Facility Management Ltd & Ors v Governing Body of Christ the King College & Anor

In exchange transactions under a void contract, there is no immutable sequence for analysing enrichment, counter-restitution and change of position. The court must identify the proper approach in the circumstances. Payments relating to distinct benefits or periods may be considered separately, particularly where the recipient’s change of position was anticipatory and arose from providing the benefit in question. An irrecoverable earlier payment does not necessarily operate as a credit against a later, separately valued benefit.

A stay pending appeal depends on the risk of injustice to both parties. A stay does not automatically prevent statutory judgment interest from running, although the court may direct a later commencement date under the applicable procedural rule.

The judgment determined consequential issues following the court’s earlier decision, [2020] EWHC 1118 (Comm). The earlier judgment held that the hire contract for a school building was ultra vires and void, dismissed the contractual and tort claims, and left an unjust enrichment claim by School Facility Management Ltd to be quantified.

The court then considered the amount recoverable, a declaration of invalidity, post-judgment use, contingent Part 20 claims, permission to appeal, a stay of execution, security for costs, interest and costs. The central legal issue on the proposed appeal was whether payments made under the void transaction had to be netted across different periods before considering change of position.

1. Permission to appeal. Permission was granted to the College on the issue concerning the sequencing of counter-restitution and change of position. The issue had a real prospect of success and general importance. Permission was refused on all the Claimants’ proposed grounds.
2. Unjust enrichment. The court maintained its earlier analysis that the unjust enrichment claim for each year’s use was effectively severable. The benefit was possession or use of property over a period, and its market value was period-dependent. Payments referable to one period therefore did not provide a complete answer to a claim for a later period. The court rejected the suggestion that earlier payments, which were irrecoverable because of anticipatory change of position, could operate as restitution vouchers against later enrichment.
3. There was no single immutable order in which unjust factor, enrichment, counter-restitution and change of position must be considered. In an appropriate case, netting may precede consideration of change of position; on these facts, however, the periods and benefits were sufficiently distinct, and the change of position arose from purchasing the building to provide the relevant benefit.
4. Stay and interest. Execution of the judgment in SFM’s favour was stayed pending the College’s appeal because the College would suffer severe and potentially irreversible prejudice, while SFM’s recovery prospects would not materially deteriorate. Interest under s.17 of the Judgments Act 1838 nevertheless continued to run. Under CPR 40.8, the court could direct when interest began, but could not vary the statutory rate merely because it was higher than commercial rates. No order delaying interest was made.
5. Relief and final orders. SFM succeeded in unjust enrichment in the sum of £711,323.88. The other unjust enrichment claims, the contractual and tort claims and the College’s counterclaim were dismissed. The court declared the contract ultra vires the College and void. No order was made on the contingent Part 20 claims. There was no order for costs between the Claimants and the College; the Council recovered 95% of its costs from the Claimants, with £332,000 payable on account.

The judgment was consequential on the High Court’s earlier decision, [2020] EWHC 1118 (Comm). Permission to appeal was granted to the College on one issue and refused to the Claimants. Execution was stayed pending the College’s appeal.