Restitution

• Citation: (2016) 17 SAL Ann Rev 614
• Publication year: 2016
• Date: 01 December 2016
• Published date: 01 December 2016

Introduction

23.1 In 2016, there were nine cases that substantively discussed the law of unjust enrichment and restitution. Most of the cases concerned a claim for restitution for unjust enrichment, with focus on the “unjust factor” inquiry. Two cases are of note. In Singapore Swimming Club v Koh Sin Chong Freddie1 (“Singapore Swimming Club”), a claim in unjust enrichment was advanced on the basis of mistake of fact. As the case concerned an unincorporated association, the dispute belied a difficult issue concerning whose mistake was relevant and the further issue of attribution of state of mind. In AAHG LLC v Hong Hin Kay Albert2 (“AAHG”), the High Court endorsed, without elaboration, “lack of consent”, a controversial ground of restitution, as an unjust factor under Singapore law.

23.2 It is also noteworthy that three cases concerned benefits (payment and performance of services) conferred in anticipation of a contract that did not materialise. These anticipated contracts cases raised interesting issues concerning enrichment and the relevant unjust factor. In particular, the Court of Appeal in Eng Chiet Shoong v Cheong Soh Chin3 (“Cheong Soh Chin”) discussed the conceptual divide between the implied contract approach and the unjust enrichment analysis, bringing certainty to a complex area of the law.

Contract and unjust enrichment

23.3 In Verona Capital Pty Ltd v Ramba Energy West Jambi Ltd,4 the High Court affirmed that where a benefit has been conferred as a result of a valid and existing contract between the parties, no claim in unjust

enrichment can arise.5 This is because the law of unjust enrichment cannot be invoked to undermine the parties' contractual allocation of risks.6

23.4 For this reason, the law of unjust enrichment is said to be subsidiary to the law of contract.7 Nevertheless, this is not to say, as a blanket rule, that contractual invalidity is a prerequisite to a claim in unjust enrichment. As Burrows has explained in The law of Restitution,8 one must consider whether on the particular facts of the dispute, the contractual allocation of risks is undermined by the law of unjust enrichment. It may be that on the facts, there is no inconsistency between contract and unjust enrichment. In Burrows' analysis, this is readily illustrated by failure of consideration cases.9

Terminology: Quantum meruit

23.5 In Cheong Soh Chin, the plaintiffs claimed for payment for services rendered to the defendants on the basis of an implied contract and, alternatively, in restitutionary quantum meruit. The Court of Appeal noted that the monetary award made on either basis would be a reasonable sum and such a quantum would, thus, be “consistent with the literal meaning of the term ‘quantum meruit’, which translated from the Latin [sic] means ‘as much as he has deserved’” [emphasis in original].10

23.6 The court observed that a claim for a reasonable sum for work done on the basis of an implied contract has been referred to as contractual quantum meruit.11 However, the court went on to stress that contractual quantum meruit is conceptually distinct from restitutionary quantum meruit, a distinction that is well-established in Singapore case law. Having regard to leading commentaries on the subject, the court was of the view that the label “quantum meruit” would more appropriately describe the claim in unjust enrichment.12 To avoid

confusion, the “most practical and commonsensical approach”, according to the court, is to focus on the substance of the claim, as opposed to the form.13

Remuneration for work done: Implied contract versus restitutionary quantum meruit

23.7 The terminology of “contractual quantum meruit” and “restitutionary quantum meruit” was discussed at length in Cheong Soh Chin because the dispute concerned the basis of remuneration for work done where the parties had not executed a formal contract. The background facts and the High Court's ruling were examined in a previous review.14 In essence, the plaintiffs and the defendants entered into a funds business joint venture, named the “WWW concept”. There was an agreement between the parties for the payment of management fees by the plaintiffs to the defendants in respect of the initial PE funds. There was, however, no agreement made regarding the payment of management fees in relation to the additional PE funds as well as five direct investments, including one hotel project (“Project Plaza”) undertaken by the defendants. The initial PE funds, the additional PE funds, as well as the direct investments were held through special purpose vehicles (“SPVs”) controlled by the defendants but set up with the plaintiffs' funds.

23.8 The joint venture failed to take off and the parties' personal and professional relationships broke down. The plaintiffs commenced proceedings to demand the defendants to transfer to them the investments and the control of the SPVs. The defendants counterclaimed for management fees and expenses incurred in relation to the investments over the years. The appeal before the Court of Appeal concerned the defendants' counterclaim for management fees. The defendants' counterclaim was substantially dismissed in entirety by the High Court. The High Court found that the parties had undertaken the WWW concept as joint risk-runners, expecting to receive rewards only when the joint venture came to fruition. As such, the defendants were not entitled to payment of management fees, beyond what the management fees that had been agreed in respect of the initial PE funds. In this connection, the High Court found that Project Plaza was part of the WWW concept.

23.9 The Court of Appeal, having carefully examined the evidence, disagreed with the High Court that Project Plaza was part of the WWW

concept. It went on to find that the defendants had performed the work with “an (accompanying) expectation … that they would be separately remunerated” [emphasis in original] for Project Plaza.15 As such, the issue was whether the defendants were to be remunerated on the basis of an implied contract or on a quantum meruit for an anticipated contract which did not materialise. The court was of the view that it would be artificial to find that there was an implied contract to pay on the facts,16 as an implied contract will only be found to have arisen in “very limited circumstances based on necessity and having regard to the intentions of the parties”.17

23.10 The court also distinguished between remuneration on an implied contract basis and remuneration on an implied term basis.18 The latter concerns a scenario where there is an express contract between the parties that does not contain an express term on remuneration and the court is being asked to imply a term for payment of a reasonable sum. A term for payment of a reasonable sum will only be implied if it is necessary to do so by reference to the traditional tests on implication of terms. Further, it has been pointed out that in deciding whether remuneration should be made on an implied contract basis, courts should be alive to the commercial context.19 When business people negotiate, they do not contemplate the formation of small, discrete contracts, but a package contract that governs all their rights and liabilities. As such, in cases where the main contract do not materialise, courts should not be overly ready to imply that a smaller, discrete contract (governing remuneration of work done) has been formed. The facts of Cheong Soh Chin, however, did not concern the non-materialisation of a main contract.

Enrichment

23.11 To succeed in a cause of action in unjust enrichment, the plaintiff must show, amongst other elements, that the defendant has been enriched. This inquiry is straightforward where money is concerned, as it is the “quintessential example of an incontrovertible benefit”.20 It will be unreasonable or impossible for the defendant to dispute that he has been enriched by the receipt of money. He may, however, defend against the claim in unjust enrichment on other

grounds, such as the lack of a recognised unjust factor or if relevant defences are applicable.

23.12 Whether the receipt of pure services enriches a defendant is less clear-cut. To be clear, pure services have market value but the law respects people's choices whether to pay for the service or not.21 The same goes for things that have market value. As Pollock CB made clear in Taylor v Laird:22

… Suppose that I clean your property without your knowledge, have I then a claim on you for payment? How can you help it? One cleans another's shoes; what can the other do but put them on? Is that evidence of a contract to pay for the cleaning? The benefit of the service could not be rejected without refusing the property itself …

23.13 In Higgins, Danial Patrick v Mulacek, Philippe Emanuel23 (“Higgins”), the plaintiff claimed that he should be paid for the management of the defendants' aircraft on the basis of an implied contract and, alternatively, in unjust enrichment. The said management services comprised: “(a) private flight services; (b) pilot training; (c) aircraft management services; and (d) aircraft registration services”.24

23.14 The High Court ruled that the private flight services, on the evidence, had been paid for and the claim must, therefore, fail.25 In respect of the pilot training, the court held that where “a defendant informs a claimant that he does not wish to receive a benefit but the claimant nevertheless proceeds to confer the benefit anyway, the defendant is under no obligation to pay for it”.26 On the facts, the plaintiff informed one of the defendants via e-mail that he intended to send the pilot on a course and asked for a decision on the matter, failing which he would take the pilot off the course. The plaintiff did not receive an affirmative reply from the said defendant but he proceeded to put the pilot on the course. The court commented that there was no unjust factor for...