Restitution

• Author: YIP Man LLB (Hons) (National University of Singapore), BCL (Oxford); Advocate and Solicitor (Singapore); Assistant Professor of Law, School of Law, Singapore Management University.
• Date: 01 December 2015
• Citation: (2015) 16 SAL Ann Rev 593
• Published date: 01 December 2015

Introduction

23.1 In 2015, there were only three cases that substantively discussed the law of unjust enrichment and restitution. This is not because restitutionary claims have grown unpopular; in fact, they had been advanced in a number of other cases. However, on these other occasions, the court (rightly) dismissed the claims without delving into the law, owing to the low prospects of success of the restitutionary claims in some cases and the success of the principal claims which rendered the alternative restitutionary claims unnecessary in others.

23.2 Only three cases notwithstanding, important restitutionary issues have been raised, including difficult topics such as risk-taking reasoning and subjective devaluation. In an area of the law that is steeped in contention and divides the common law world, the Singapore courts have made commendable efforts to clarify the complexity that has confounded practitioners by correcting misconceptions and highlighting the relevant doctrines that underpin the parties' arguments.

Unjust enrichment

Old forms of action

23.3 The Court of Appeal had on two recent occasions, viz, Alwie Handoyo v Tjong Very Sumito[2013] 4 SLR 308 (‘Alwie Handoyo’) and Wee Chiaw Sek Anna v Ng Li-Ann Genevieve[2013] 3 SLR 801 (‘Anna Wee’), explained the modern approach to the law of unjust enrichment. Two related matters are of paramount importance for purposes of bringing unjust enrichment claims. First, the Court of Appeal had in Alwie Handoyo highlighted that ‘common’ counts of action such as an action for ‘money had and received’ were historical forms of action that had been abolished; they do not disclose the underlying cause of action: Alwie Handoyo at [124]–[125]. Where the action is based in the law of unjust enrichment, the plaintiff is to plead unjust enrichment and establish the requisite elements by following the four-question framework of analysis:

1. (a) Has the defendant been enriched?

2. (b) Was the enrichment at the plaintiff's expense?

3. (c) Was the enrichment unjust?

4. (d) Are there any applicable defences?

In (2013) 14 SAL Ann Rev 465 at 465–467, paras 22.2–22.5, commenting upon the Court of Appeal's clarification, it was pointed out that there are claims based on unjust enrichment which have been historically pleaded under other counts in indebitatus assumpsit: for example, quantum meruit (value for services received by the defendant). Litigators continue to use this historical label instead of pleading the relevant cause of action. There are two problems with the continued reference to old forms of action. First, it has long been established under Singapore law that there are two types of quantum meruit: contractual or restitutionary: see, for example, Rabiah Bee Bte Mohamed Ibrahim v Salem Ibrahim[2007] 2 SLR(R) 655 at [123], per Judith Prakash J. Where there is a contract, a quantum meruit claim for remuneration essentially means that the plaintiff is asking the court to imply a term into the agreement for reasonable remuneration to be paid. The focus is on the objectively ascertained intentions of the contracting parties: Benedetti v Sawiris[2014] AC 938 at [9]. A restitutionary quantum meruit, in contrast, is focused on the defendant's gains.

23.4 The second problem with the persistent use of historical labels is the risk that parties do not plead their unjust enrichment claims in accordance with the proper framework of analysis. Instead, they consider a cause of action having been made out by simply proving that services had been performed for the benefit of the recipient. This, in particular, obscures the unjust factor inquiry. This ties in the second matter to note in relation to advancing unjust enrichment claims. It was stressed by the Court of Appeal in Anna Wee: under Singapore law, claims in unjust enrichment must be based on a relevant ‘unjust factor’ such as mistake, failure of consideration, etc: Anna Wee at [129]–[134]. The label quantum meruit, however, singularly focuses on the fact that services have been received by the defendant, but that fact alone does not justify payment. Nor does the fact that services have been performed for the defendant establish that there is an enrichment – the element of enrichment must be examined by reference to the recognised enrichment tests: see Graham Virgo, The Principles of the Law of Restitution (Oxford University Press, 3rd Ed, 2015) ch 4. As a result, parties bring ill-conceived unjust enrichment claims which neither advance their own interests nor facilitate the development of the law of unjust enrichment in Singapore.

23.5 This was what happened in Cheong Soh Chin v Eng Chiet Shoong[2015] SGHC 173 (‘Cheong Soh Chin’). In that case, the plaintiffs entrusted substantial funds to the defendants for various investments which were held through a web of special purpose vehicles (‘SPVs’) controlled by the defendants. The investments were undertaken pursuant to the ‘WWW concept’, a long-term investment plan that the parties had the common intention to work towards. The concept would combine the first defendant's industry knowledge and personal connections with the plaintiffs' capital and risk appetite. The plan was to find, fund and assist fledgling fund managers in the market to start a new fund each, and the parties would earn a proportion of each fund manager's total profits. Owing to the parties' ‘close personal relationship of trust and confidence’, the court noted (at [16]) that they did not enter into any contract (oral, written or implied) to govern their relationship. Nevertheless, it was not disputed that the plaintiffs agreed to pay the first defendant a management fee of US$450,000 per annum in respect of the first five investments that were entered into to get the WWW concept off the ground but which were not part of the WWW concept. It was also not disputed that this agreement did not extend to the subsequent investments undertaken as part of the WWW concept.

23.6 The WWW concept proved unachievable, and the parties' relationship, both on the personal and professional levels, deteriorated and became ultimately unsalvageable. The plaintiffs commenced proceedings to ask for the transfer of the ownership and control of the investments and the SPVs, as well as for a full account to be taken on the defendants' management of the investments. The defendants counterclaimed against the plaintiffs for management fees and reimbursement of expenses incurred in respect of their management of the plaintiffs' investments. Of interest is the defendants' counterclaims for work done and expenses incurred in managing the plaintiffs' various investments which were said to be based on restitutionary quantum meruit because the court found that there was no agreement for payment on the facts.

23.7 From the judgment, it was clear that the defendants did not identify the relevant unjust...