Enrichment by Transfer (L26-28)

Question 1

What is the definition of the condictio indebiti?

Answer 1

Recovery of payments and other transfers:
- Which were undue (explains why no legal basis for retention).
and
- Made in error (explains why undue transfer not a gift).

Question 2

What are some examples of undue transfers?

Answer 2

Overpayment of a debt.
- Peter Walker v Leith Glazing.

Payment made to wrong person.
- Royal Bank of Scotland v Watt.

Payment made of non-existent debt.
- Moore’s Executors v McDermid.

Payment under a void contract.
- Morgan Guaranty Trust Co of New York v Lothian Regional Council.

Question 3

What did Lord President Hope say about the condictio indebiti in the case of Morgan Guaranty Trust Co of New York v Lothian Regional Council?

Answer 3

Definition:
“The essentials of the condicitio indebiti are that the sum which the pursuer paid was not due and that he made the payment in error.” (p316).

Applied the facts of Morgan Guaranty:
“The condictio indebiti is available for the recovery of money paid or property transferred under an obligation which is void but was erroneously thought to be valid.” (p310).

Question 4

What is the general test for the condictio indebiti?

Answer 4

1. Deliberate conferral and receipt of a benefit (i.e. a transfer).
2. Purpose of conferral was to discharge a legally recognised duty (e.g. performance under a contract).
3. Purpose of conferral failed, because benefit transferred was undue.
4. Reason why conferral was made was an error by transferor as to legal liability (a “liability error”).

Plus:
Recovery may be denied if there is a relevant defence.
Whole circumstances of the case must make it equitable (as between the parties) to redress the unjustified enrichment.

Question 5

What did LP Hope tell us about the role of error in the condictio indebiti, in the case of Morgan Guaranty?

Answer 5

“In my opinion the essentials of the condictio indebiti are that the sum which the pursuer paid was not due and that he made the payment in error. These matters must be the subject of averment by the pursuer to show that prima facie he is entitled to the remedy.
It is the fact that the sum was not due that provides the ground for repetition [i.e. repayment] on the principle of unjustified enrichment. An averment that the payment is made through error is needed in order to show that this is not a case of donation.”

Question 6

What is the definition of the condictio causa data causa non secuta?

Answer 6

Recovery of payments (and other transfers):
- Which were made for future purpose (explains basis for making transfer).
and
- Future purpose failed to materialise (explains why no legal basis for retention).

Question 7

Compare the scope of the condictio causa data and the condictio indebiti.

Answer 7

Condictio indebiti:
- Scope relates to present purpose of purporting to discharge an obligation.

Condictio causa data:
- Scope relates to some future purpose not purporting to discharge any present obligation.

Question 8

What are some typical situations involving the conditio causa data?

Answer 8

• Transfer for future purposes in non-contractual situation e.g. contemplation of marriage.
• Transfer of “advance” made in contractual context.
• Transfer of payment made under frustrated contract.

Question 9

What is the general test for the condictio causa data?

Answer 9

1. Deliberate conferral and receipt of benefit.
2. The reason for the conferral related to:
   
   • A future purpose outside contract or;
   • The future purpose of completing performance of a contract which is subsequently frustrated before any counter-performance.
3. The future purpose failed to materialise, meaning the retention of the benefit is without a legal ground.
4. No valid defence exists.
5. The whole circumstances of the case must make it equitable (as between the parties) to redress the unjustified enrichment.

Question 10

What arguments were put forward AGAINST the claim in Shilliday v Smith?

Answer 10

• Argued that Mrs Shilliday had conferred a benefit on Mr Smith in contemplation of marriage but this needed to amount to a condition.
• Argued that basis of payments was that made for Mrs Shilliday’s own benefit – actings in suo.

Question 11

What was the decision in Shilliday v Smith?

Answer 11

• Did not have to be formally agreed ‘condition’, and was not like a contract.
• Was not in suo – basis for transfers was the causa [i.e. the purpose] of future marriage, not personal benefit.

Question 12

What was LP Rodger’s reasoning in Shilliday v Smith?

Answer 12

“The important thing to notice is that … the duty to restore is said to be based not on agreement (paction), but on a natural ground, i.e., it is a duty imposed by law.”

Question 13

Stair’s Institutions, I vii 7, was cited in Shilliday v Smith. What did it say?

Answer 13

‘As all things that become in the possession of either party in contemplation of marriage, the marriage, which is the cause, failing to be accomplished, the interest of either party ceaseth, and either must restore.’

Question 14

How is cause and motive important in the condictio causa data?

Answer 14

Causa (basis which fails) does not require express agreement but ‘the purpose which the person who makes the conferral seeks to achieve by the performance must be known and accepted as the basis of the performance by both parties’ (Evans-Jones, vol 1, para 4.10).

Defined in Grieve v Morrison as ‘mutually agreed understanding’ (per Lord Morrison).

‘Performances are recoverable if their cause fails but not if the motive of the person who performs in frustrated’ (Evan-Jones, vol 1, para 4.11).

Question 15

What is the law surrounding transfers made during cohabitation?

Answer 15

Family Law (Scotland) Act 2006, s28.
(1) … where the cohabitants cease to cohabit otherwise than by reason of the death of one (or both) of them…
2(a) … [the court may] make an order requiring the other cohabitant (the “defender”) to pay a capital sum of an amount specified in the order to the applicant.

Question 16

What are the application of the condictio causa data?

Answer 16

1. General application: transfers for future purpose not involving contract.
2. Application to ‘advances’ made in contractual context.
3. Application to performance under valid contracts?
   - None in general but one main exception:
   • Frustrated contracts, were no counter-performance given.
     - Two areas of possible uncertainty under breach of contract:
   • Rescinded contracts, where no counter-performance received.
   • Acceptance of benefit after material breach of contract.

Question 17

In the case of Watson & Co v Shankland (1871) 10 M 142, what did LP Inglis say about the application of CCDCNS to advances?

Answer 17

‘If money is advanced by one party to a mutual contract, on the condition and stipulation that something shall afterwards be paid or performed by the other party, and the latter party fails in performing his part of the contract, the former is entitled to repayment of his advance, on the ground of failure of consideration’.

Question 18

When is CCDCNS applicable to advances?

Answer 18

• If money is advanced by one party to a mutual contract…
• On the condition and stipulation that something shall afterwards be paid or performed by the other party [i.e. under a contract]…
• And the latter party fails in performing his part of the contract…
• The former is entitled to repayment of his advance, on the ground of failure of consideration [i.e. of the causa].

Question 19

In the case of Watson & Co v Shankland, why was the ‘advance’ not treated as something retained with a legal basis under the contract?

Answer 19

Advance distinguished from prepayment:
- Lord President Inglis founds on ‘the material and clear distinction between advance and payment or prepayment’.

Advance against freight:
- ‘An advance made on the faith of the master and owners performing their contract, and in consideration of their subsequent performance’.

Prepayment of freight:
- ‘In the present case there is no stipulation for payment of the freight, or any other part of it, before the term stipulated in the proper freight clause, viz., the right delivery of the cargo at the port of discharge’.

Question 20

In Watson & Co v Shankland, LP Inglis states that advances are recoverable under WHAT circumstances?

Answer 20

Advances are recoverable when the consideration [causa] fails:
‘If the consideration on which the advance is made fail by the non-completion of the voyage, the advance is pari ratione repayable to the charterer.’
‘I speak of a case of a total failure, as here, when there is no claim for freight….’.

Question 21

Does the CCDCNS apply to performance under valid contracts?

Answer 21

General rule: no application because the contract provides a legal ground for retention.

Exception: payments made under a contract which is frustrated before any counter-performance.

Authority: Cantiere San Rocco v Clyde Shipbuilding Co 1923 SC (HL) 105.

Question 22

How was the CCDCNS applied in Cantiere?

Answer 22

Claim not contractual.
The first instalment did not in itself oblige counter-performance.
Absence of ground for retention.

Question 23

What did Lord Shaw state as the decision in Cantiere?

Answer 23

‘Unjust enrichment, i.e., enrichment by reason of the thing being received and the consideration and return failing – the principle of preventing that underlies as a reason the doctrine of restitution’.

‘The set of engines has not been supplied, and for the failure to supply no one is to blame. There has in fact been a causa non secuta.’

‘The person who received £2310 in part payment for engines which were to be built and supplied, must restore money in the event of the engines not having been supplied, and not even having been built’.

Question 24

Does the CCDCNS apply to breached / rescinded contracts?

Answer 24

Situation: payment made under a contract in anticipation of a counterpart performance which never occurs because of material breach of contract.

Answer: restitution not available under the principles of unjustified enrichment and CCDCNS.

But separate contractual restitutionary remedy might still be available:
Stork Technical Services (RBG) Ltd v Ross’s Executor 2015 SLT 160.

Question 25

What is the problem of UE for an illegal contract?

Answer 25

Danger of contract & unjustified enrichment coming into conflict?
Competing goals:
UE LAW: promoting justice and equity between parties by recovery of benefits which constitute unjustified enrichment.
CONTRACT LAW: discouraging illegal transactions by refusal to enforce contractual rights or provide remedies for contracts tainted by illegality.

Desire to avoid risk of UE having same effect as indirectly facilitating enforcement of illegal contract, subverting the prohibitory norm as applied to the contract.

Question 26

What was the question in Cuthbertson v Lowes (1870) 8M 1073?

Answer 26

When does the benefit transferred under an illegal contract count as an unjustified enrichment which should be reversed?

Question 27

What is the law when a statutory illegality is aimed at penalising conduct?

Answer 27

Statutory illegality aimed at penalising conduct:
Cases ‘in which statutory enactments have been formed for the protection of purchasers against the fraud of traders, and in these cases the statutory penalty being directed against one of the parties only for the protection of the other, he alone must suffer the consequences of a breach of the enactment’.

Question 28

What is the law when a statutory illegality is aimed at implementing a policy measure?

Answer 28

Statutory illegality aimed at implementing policy measure:
Cases where ‘the statutes founded upon by the directed against both of the parties – the buyer is equally prohibited with the seller… the prohibition, or statutory nullity of the agreement is not designed for the protection of either of them, but to enforce a measure of public policy’.

Question 29

In the case of Cuthbertson, what was the purpose of the statutory illegality?

Answer 29

Cuthbertson v Lowes enactments were a technical policy measure.

Question 30

Under illegal contracts, is recovery determined by whether conduct displays ‘turpitude’?

Answer 30

“The defender seeks to retain the pursuer’s potatoes without paying anything for them, on the ground that the Court cannot take cognisance of an agreement which by the statutes is declared to be null and void.”

“No doubt the Court cannot enforce performance of an illegal contract, and in turpi causer melior est condictio possidentis, but there is no turpitude in a man selling his potatoes by the Scotch and not by the imperial acre; …
Although he cannot sue for implement of such a contract, I know of no authority, in the absence of turpis causa, to prevent the pursuer from recovering the market value of the potatoes…”

• Cuthbertson.

Question 31

Analyse Cuthbertson v Lowes.

Answer 31

Key question is whether the contractual performance exhibits turpitude (i.e. turpis causa).
Turpitude is not assumed merely from the illegality, though more likely to be if regarded as extreme (e.g. see Jamieson v Watts Trs).
In Cuthbertson v Lowes, held ‘there is no turpitude in a man selling his potatoes by the Scotch and not by the imperial acre’.
Therefore ‘in turpi causa melior est conditio possidentis’ (= in pari delicto rule) does not apply to bar recovery in UE.
Remedy of recompense granted: “Recovering the market value of the potatoes” was the measure of the UE.

Question 32

What is the definition of the condictio ob turpem vel iniustam causam?

Answer 32

The condictio ob turpem is the claim for recovery of benefits transferred for illegal or immoral/blameworthy purpose (i.e. turpitude).

Question 33

What is the test for the condictio ob turpem?

Answer 33

Requirements:
1. Deliberate conferral/receipt under illegal transaction.

2. Conduct must be free of turpitude.
3. If pursuer not morally reprehensible (i.e. shows no turpitude), then recovery permitted.
4. If pursuer morally reprehensible (conduct shows turpitude), the parties are in pari delicto (i.e. equally blameworthy) and pursuer cannot recover.

Question 34

What is the in pari delicto rule?

Answer 34

• Is raised as a defence against a claim in UE brought by a pursuer trying to recover benefits transferred under an illegal contract.
• If pursuer’s conduct shows no turpitude (i.e. party not morally blameworthy), parties not in pari delicto and can recover: Cuthbertson.
• If pursuer’s conduct shows turpitude (i.e party morally blameworthy), then in pari delicto and cannot recover: Watt v Jamieson’s Trs.
• If both parties implicated in turpitude, parties are in pari delicto and no recovery: Barr v Crawford.

Question 34

What is the in pari delicto rule?

Answer 34

• Is raised as a defence against a claim in UE brought by a pursuer trying to recover benefits transferred under an illegal contract.
• If pursuer’s conduct shows no turpitude (i.e. party not morally blameworthy), parties not in pari delicto and can recover: Cuthbertson.
• If pursuer’s conduct shows turpitude (i.e party morally blameworthy), then in pari delicto and cannot recover: Watt v Jamieson’s Trs.
• If both parties implicated in turpitude, parties are in pari delicto and no recover: Barr v Crawford.

Question 35

What was the decision in Watt v Jamieson’s Trs?

Answer 35

Result: No recovery since Jamieson’s conduct showed turpitude.
- Conduct liable to a penalty: “What the pursuer did is in terms declared to be unlawful by a regulation passed in defence of the Realm and fenced with severe penalties” (Lord Jamieson).
- Lord Jamieson distinguished Cuthbertson by pointing to absence of turpitude, implying presence of turpitude in Jamieson v Watts Trs itself.
- Lord Patrick saw conduct here as ‘subversive of interests of the state’ and ‘of which the Courts cannot take cognizance except to visit them with penalties’, i.e. blameworthy = turpitude.

Question 36

How did Lord Mayfield apply the in pari delicto rule in Barr v Crawford?

Answer 36

“There was in my view illegality because the payment made by Mrs Barr was a bribe made in the course of a dishonest intention thus tainting the transaction. It can also be described more simply, perhaps, as a corrupt agreement.”
Both parties implicated in conduct constituting criminal offences and corruption, and thus showed turpitude, meaning they were in pari delicto.

Mrs Barr’s turpitude put her in pari delicto.
“In my view positive and clear averments would have to be made before it would be possible to draw a conclusion, warranting an inquiry, that Mrs Barr was not in pari delicto if, indeed, such a doctrine applies to the present circumstances. Counsel was not able to indicate to me that he could satisfactorily amend. I accordingly dismiss the action.”

Question 37

How was the in pari delicto rule applied in M’Quarrie v Crawford (1951) SLR (Sh Ct) 84?

Answer 37

Held “the pursuer knowingly paid money to the defender to enable the latter without justification to induce a member of the British Motor Trade Association to break the rules of the said association or to induce a member of the public to breach a covenant with the said association.”
Result: Sheriff Walker:
“It would be difficult to visualise a better example of what is referred to in Bell’s Principles, s37 and Commentaries, 1,2,14 as “a mischievous consideration”, making the contract illegal at common law.”
“The exceptions to the rule in turpi causa melior est condictio possendentis are discusses in Gloag on Contract”: none apply, so in turpi causa rule applied (i.e. in pari delicto rule) and no recovery.

Question 38

In Patel v Mirza, what did Lord Toulson say about the illegality doctrine?

Answer 38

The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system.

Question 39

Patel v Mirza: in assessing whether the public interest would be harmed in that way, what is necessary to consider?

Answer 39

• Underlying purpose of prohibition which has been transgressed and whether that purpose will be enhanced by denial of claim.
• Any other relevant public policy on which denial of claim may have an impact and;
• Whether denial of claim would be proportionate response to illegality, bearing in mind punishment is a matter for criminal courts.

Question 40

Within the framework discussed in the illegality doctrine, what factors may be relevant?

Answer 40

• Seriousness of the conduct.
• Its centrality to the contract.
• Whether it was intentional.
• Whether there was marked disparity in parties’ respective culpability.

Question 41

What is the definition of the condictio sine causa?

Answer 41

Gloag & Henderson state that the condictio sine causa “denotes an essential residual category covering a number of cases where Scots law recognises a right to repayment in situations which do not fit conveniently under any of the previous headings” (para 24.15).
i.e. a residual claim to accommodate situations analogous to (but outside) principal three transfer claims.

Specific application unclear, since has not been applied since existence reaffirmed in Shilliday v Smith.
Current understanding is derived mainly from recent academic commentary.

Question 42

What was concluded in the case of British Oxygen Co v South of Scotland Electricity Board 1959 SC (HL) 17 which was bought under CONDICTIO INDEBITI?

Answer 42

In the House of Lords, Lord Merriman approved the following statement:
“When a man pays more than he is bound to do by law for the performance of a duty which the law says is owed to him for nothing, or for less than he is paid, there is a compulsion or concussion in respect of which he is entitled to recover the excess by condictio indebiti …”

Question 43

What would be the case if British Oxygen v SSEB were tried now?

Answer 43

In Scots law we now know a claim under the condictio indebiti requires proof of error on the part of the transferor.

Cases involving not error but compulsion, such as British Oxygen Co v SSEB, would probably now be dealt with by a claim under the condictio sine causa on the authority of Shilliday v Smith.

Question 44

How did Lord Rodger acknowledge the existence of the condictio sine causa in Shilliday v Smith?

Answer 44

“As the law has developed, it has identified various situations where persons are to be regarded as having been unjustly enriched at another’s expense and where the other person may accordingly seek to have the enrichment reversed. The authorities show that some of these situations fall into recognisable groups or categories.
Since these situations correspond, if only somewhat loosely, to situations where remedies were granted in Roman law, in referring to the relevant categories our law tends to use the terminology which is found in the Digest and Code.
The terms include condictio indebiti; condictio causa data causa non secuta and – to a less extent – condictio sine causa.”