Dowman Imports Ltd v 2 Toobz Ltd (Rev 1)

A claim for restitution may arise where services are provided at the defendant’s request in anticipation of a contract which is never concluded. Enrichment may be established by the requested or freely accepted provision of services, even where no enduring marketable benefit remains. The court must still decide whether the enrichment was unjust, including whether the claimant knowingly assumed the risk of receiving no payment. The value of the enrichment is assessed objectively by reference to the market value of the services, subject to subjective devaluation. A defendant’s request for services, made with knowledge that they are not gratuitous, may restrict that devaluation. The court may impose restitution where the defendant’s conduct in abandoning the proposed transaction and denying payment is unconscionable.

Dowman supplied development services and toy samples to Toobz while the parties anticipated, but never concluded, an agreement under which Dowman would manufacture the Bush Babies toys. Toobz later contracted with Golden Bear and denied liability for the value of Dowman’s development work. Dowman abandoned its contractual claim and pursued restitution, quantified by a £144,450 invoice.

Toobz denied enrichment, challenged Dowman’s standing to recover for services supplied through the Chinese factory, and alleged that toys supplied under an initial test order were defective. The central issues were whether Toobz had been unjustly enriched, whether the enrichment was at Dowman’s expense, the proper valuation of the services, and whether Toobz’s counterclaim was sustainable.

1. Restitutionary claim. The claim was properly characterised as restitution for services provided in anticipation of a contract, with quantum meruit describing the valuation of the enrichment rather than supplying a contractual basis for recovery.
2. Applicable framework. The court applied the four questions identified in Benedetti v Sawiris: whether the defendant was enriched, whether the enrichment was at the claimant’s expense, whether it was unjust, and whether any defence was available. In a services case, valuation focuses on the defendant’s gain and is ordinarily based on the objective market value of the services.
3. Enrichment. Requested or freely accepted services may constitute enrichment even where they leave no enduring or marketable residue. Toobz repeatedly requested and accepted Dowman’s development work, knowing that it was not being provided gratuitously. That was sufficient to establish enrichment and also limited the force of any subjective devaluation argument.
4. Unjustness and risk. The fact that the parties were negotiating and that the claimant hoped to obtain a production contract did not, by itself, place the whole risk of non-payment on the claimant. The court had to assess the circumstances, including whether the defendant had increased the risk that no contract would be concluded and whether its conduct in denying payment was unconscionable. Toobz’s conduct was unconscionable.
5. Standing and factory services. Dowman could recover for services procured through the Chinese factory. Toobz had treated Dowman and the factory as one operational team, had requested the services through Dowman, and had understood that Dowman would be the contracting party. The claim concerned the value of enrichment transferred to Toobz, not compensation for losses suffered by Dowman or the factory.
6. Counterclaim. The initial order was a test production run made while the design remained under development, not a consignment intended for resale. In the absence of the expert evidence previously considered necessary, and in light of the parties’ shared understanding of the order’s purpose, Toobz’s defective-goods counterclaim was dismissed.
7. Disposition. Dowman was awarded £144,450 inclusive of VAT on its restitutionary claim. Toobz’s counterclaim was dismissed. Interest, costs and consequential matters were reserved.