Restitution

• Date: 01 December 2014
• 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.
• Published date: 01 December 2014

Introduction

23.1 There Were Only A Small Number of Cases Dealing With The Law of Unjust Enrichment And Restitution In The Year 2014. The Mostnoteworthy Case Is The Court of Appeal's Decision In chan Yuen Lan V See Fong Mun[2014] 3 Slr 1048 (chan Yuen Lan) Which Elucidatedupon The Juridical Basis of The Resulting Trust, A Matter That Remains Rifein Debate In Other Common Law Jurisdictions. The Decision Has Significant Implications For The Divide Between The Law of Unjust enrichment And The Law of Trusts, And These Implications Will Need to Be Carefully Measured And Sorted Out In Future Cases. The Remaining Cases Mainly Deal With The Unjust Factor Inquiry, Both Generally As Well As With reference To Specific Unjust Factors, Namely, Mistake And Free Acceptance. These Judgments Generally Echo The Sentiments of The Court of Appeal In Two Major Decisions Handed Down In 2013, 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). More Thanthat, However, The 2014 Judgments Continue The Theme of Clarifying The unjust Inquiry, Thereby Adding To The Richness of The Local Jurisprudence As Well As Raising Finer Points of Law For Future Consideration.

Unjust Enrichment And Contract

23.2 In Total English Learning Global Pte Ltd v Kids Counsel Pte Ltd[2014] SGHC 258 (Total English Learning Global Pte Ltd), the High Court dismissed a claim in unjust enrichment where the arrangement between the parties was governed by a valid and existing contract. The decision thus reaffirmed the well-established principle that a claim based on unjust enrichment will not be allowed if it would subvert theallocation of risks in a valid and existing contract between the parties: see Alwie Handoyo v Tjong Very Sumito[2013] 4 SLR 308, discussed in (2013) 14 SAL Ann Rev 465 at 467, para 22.6. The facts of the case that are relevant to the restitutionary claim may be simply stated. Thedefendant franchisees had entered into franchise agreements pursuant to which they were allowed to run education centres in Singapore offering the I Can Read (ICR) system, a type of English literacy and phonics programme. The original franchisor later purportedly assignedthe entire business, including the franchise arrangements in Singapore,to the plaintiffs. The validity of this assignment was contested by thedefendant franchisees. These defendants also subsequently replaced the ICR system with another competitor programme, and the unused ICR materials were returned to the plaintiffs. These ICR materials had been purchased by the said defendants from the original franchisor pursuant to a sales arrangement that the franchisee would order the materials based on its specific needs and requirements without being under anobligation to purchase a requisite amount.

23.3 There were multiple claims and counterclaims raised betweenthe parties in the two sets of proceedings that were heard together onappeal to the High Court. The cause of action in unjust enrichment was a counterclaim brought by the aforementioned defendant franchisees against the plaintiffs for the price of the returned ICR materials. The court found that this counterclaim faced two difficulties. First, as a matter of contract, the return of the unused ICR materials was one of the obligations which the franchisee had to fulfil upon the termination or expiry of the agreement under the elaborate termination procedure prescribed in the franchise agreements; however, the agreements did not stipulate for the franchisor to refund the price of the returned materials. The court thus ruled (at [136]), and very sensibly so, that the plaintiffs' receipt of the unused ICR materials could not give rise to any claim inrestitution. In other words, the court was saying that the contract between the parties had already allocated the risks and there was therefore no room for restitution. One might have thought that the defendants could have argued for an implied term of reasonable remuneration instead. However, such an argument would probably fail as well, in light of the elaborate prescription of the termination procedure that arguably rendered the lack of provision of refund as an intentional allocation of risks as opposed to a gap in the contract that should be plugged.

23.4 The second difficulty with the unjust enrichment claim relates to the failure to establish a relevant unjust factor, a core ingredient of the claim. This will be discussed below at paras 23.2123.24.

Unjust enrichment and trusts

23.5 In (2013) 14 SAL Ann Rev 465 at 476477, paras 22.3022.31, itwas noted that in See Fong Mun v Chan Yuen Lan[2013] 3 SLR 685, the High Court, without deciding on the issue, offered some reflections on the debate as to the juridical nature of the resulting trust. Essentially, there are two competing schools of thought: (a) Robert Chambers' absence of intention thesis; and (b) the presumed intention rationalisation, which is often attributed to Lord Browne-Wilkinson's judgment in Westdeutsche Landesbank Girozentrale v Islington LondonBorough Council[1996] AC 669 at 708 (Westdeutsche). An appeal from this decision afforded the Court of Appeal in Chan Yuen Lan (above, para 23.1) an opportunity to revisit this jurisprudential debate that it did not conclusively resolve in the earlier case of Lau Siew Kim v Yeo Guan Chye Terence[2008] 2 SLR(R) 108 (Lau Siew Kim).

23.6 Chambers' lack of intention analysis was affirmed to be themore sensible basis for the principled yet pragmatic development of this equitable doctrine: Chan Yuen Lan at [44]. The Court of Appeal was, nevertheless, mindful that accepting such an account of the resulting trust could potentially blur the distinctions between unjustenrichment claims and claims based on resulting trust, and that thiscould adversely affect third parties' rights and the security of commercial transactions...