Restitution

AuthorYIP Man LLB (Hons) (National University of Singapore), BCL (Oxon); Advocate and Solicitor (Singapore); Associate Professor of Law, Yong Pung How School of Law, Singapore Management University.
Publication year2021
Citation(2021) 22 SAL Ann Rev 720
Date01 December 2021
I. Introduction

25.1 There were not many cases on the law of restitution in 2021 but several interesting issues were raised in these few cases: for example, the concept of interceptive subtraction; the application of failure of consideration in the domestic context; exploitation of weakness as an unjust factor; restitution of benefits transferred pursuant to a judgment that is subsequently reversed; and the limitation period applicable to unjust enrichment claims.

II. A subsisting contract precludes a claim in unjust enrichment

25.2 In Xanthopoulos, Elias v Rotating Offshore Solutions Pte Ltd,1 the General Division of the High Court (“High Court (General Division)”) affirmed the well-established principle that a subsisting contract precludes a claim in unjust enrichment. In that case, the plaintiff, who was an engineering director of the first defendant and the managing director of the second defendant, resigned from both roles. Both the first and second defendants were in the same group of companies. The plaintiff commenced suit to claim, inter alia, unpaid fees for his referral and project managing services. His claim in unjust enrichment arose as a result of a lacuna in the contract with the second defendant in so far as the legal relationship between the plaintiff and the first defendant was concerned. This lacuna affected whether the plaintiff would be paid by another company in the group, other than the second defendant. As the High Court (General Division) came to the conclusion that the contract should be rectified such that the plaintiff would be paid by any company in the group (including the second company), the plaintiff's claim in unjust enrichment, as a matter of logic, fell away.2

25.3 The High Court (General Division) explained the outcome as justified by the principle of party autonomy.3 It went on to observe:4

In a similar vein, Prof Tang Hang Wu in his chapter in Research Handbook on Unjust enrichment and Restitution (Elise Bant, Kit Barker and Simone Degeling eds) (Edward Elgar Publishing, 2020) at pp 103–104 states that unjust enrichment ‘may usually only operate if there is no valid contract between the claimant and the defendant’ and that it is ‘only in exceptional cases that an unjust enrichment claim may operate where there is a subsisting contract’, as it is ‘not for the courts to re-write the contract between the parties’ and ‘upset the agreed distribution of risks’ Prof Tang goes on to observe (at pp 105–106 and 107) that for unjust enrichment to apply where there is a contract between the parties, a claimant must first be able to establish that the contract is void or rescinded due to a vitiating factor or discharged due to breach, or that there is a gap in the contract. If not, ‘then contractual principles should govern and the unjust enrichment argument would be a non-starter’ (at pp 107–108).

III. “At the expense of”: Interceptive subtraction

25.4 An “interceptive subtraction”, as conceived by Peter Birks, occurs where assets were “on their way, in fact or law, to the claimant when the defendant intercepted them” and these assets were never legally owned or possessed by the plantiff.5 Birks considered a causal connection sufficient for the purpose of establishing that the defendant's enrichment was received at the plaintiff's expense. In Wee Chiaw Sek Anna v Ng Li-Ann Genevive,6 the Court of Appeal, however, rejected an approach based on causal connection and said that the benefit received by the defendant must be one that the plaintiff is legally entitled to or forms part of its assets, whether the benefit is one of traceable property or a mere value transferred.7 Specifically, in respect of Birks' “interceptive subtraction”, the court said that it lacked certainty as to the plaintiff's entitlement to the benefit.8

25.5 The High Court (General Division) considered the applicability of this concept under Singapore law in Ok Tedi Fly River Development Foundation Ltd v Ok Tedi Mining Ltd9 (“Ok Tedi Fly River Development Foundation”), in the context of a striking-out application. The claim

in unjust enrichment was struck out on the basis that the elements of “at the expense of” and “unjust factor” were “plainly and obviously unsustainable”.10

25.6 The background facts to the dispute are fairly complex. Pursuant to a class action brought against the first defendant (“OTML”), the owner and operator of the mine in Papua New Guinea, and BHP Group (which held 52% shares in OTML) for breach of a settlement agreement entered in relation to proceedings for environmental damage caused by the mining activities, BHP Group commenced a plan to exit as the shareholder of OTML. It suffices to highlight that the second defendant (“PNGSDP”), a Singapore incorporated company limited by guarantee, was set up for the purpose of holding 52% shares in OTML (divested by BHP Group), receiving dividends and other money arising from the shares (“the Distributions”) and applying the Distributions to promote sustainable development in Papua New Guinea and to advance the general welfare of the people of Papua New Guinea (particularly those of the Western Province) through certain programmes and projects.11 According to the “Program Rules” (a schedule to the articles of association of PNGSD), which had the effect of a statutory contract between PNGSDP and its members, PNGSDP was obliged, inter alia, to set up a fund (“the Long Term Fund”)12 and to apply the Distributions for the benefit of the people of the Western Province and the people of Papua New Guinea.

25.7 The unjust enrichment in the case was brought by the plaintiffs13 against the second defendant, PNGSDP, and it must be understood against the plaintiffs' claim in deceit against OTML. In essence, the plaintiffs alleged that OTML had made certain representations about BHP Group's exit plan to members of the affected communities (“the Share Offload Representations”) which meaning and effect were that: the 52% shares in OTML and Distributions would belong beneficially to the members of the affected communities; these aforesaid assets would be held on trust for the members of the affected communities and/or for the purpose of ameliorating the environmental damage caused by

the mining activities; and/or the 52% shares would be unencumbered.14 The members of the affected communities relied on the Share Offload Representations to execute the relevant forms to opt out from the class action (“the Opt-Out Forms”). The plaintiffs also took the position that the members of the affected communities only discovered that the Share Offload Representations were false in April 2019 in that the 52% shares in OTML and Distributions were not held on any trust, nor were they unencumbered.

25.8 Turning now to the plaintiffs' unjust enrichment claim, the essence of their argument was that PNGSDP was unjustly enriched by retaining assets (the 52% shares and the Distributions) that should have been applied for the benefit of the members of the affected communities. They contended that the shares were “meant for” them by reason of the Share Offload Representations which they relied on to execute the Opt-Out Forms, but the shares were intercepted by PNGSDP. Although the plaintiffs did not use the label of “interceptive subtraction”, the High Court (General Division) observed that their argument was essentially based on that concept. It went on to hold that even if a factual entitlement (as opposed to a legal entitlement) to property would suffice, the plaintiffs' case was “plainly and obviously unsustainable”15 because the plaintiffs could not show that the members of the affected communities had a factual entitlement to the assets held by PNGSDP.16 In the main, even if the deceit claim against OTML was successful, the members of the affected communities would only be entitled to damages and not the fulfilment of the Share Offload Representations.17 As to the Distributions, the Program Rules precluded any assertion of factual entitlement and, most importantly, PNGSDP could apply the earmarked funds for programmes and projects which benefited “the people of the Western Province of Papua New Guinea”, which was a wider set than the members of the affected communities.18 There was therefore no certainty that any application of the Distributions would or must benefit the members of the affected communities. Finally, in respect of the Long Term Fund, the Program Rules similarly precluded any assertion of factual entitlement by

the members of the affected communities.19 The members of the affected communities also did not have a contractual right to those assets.20
IV. Failure of consideration
A. Shared basis and indirect transfer

25.9 In Symphony Ventures Pte Ltd v DNB Bank ASA, Singapore Branch21 (“Symphony Ventures”), the High Court (General Division) considered an unjust enrichment claim based on failure of consideration in the context of an application for leave to amend the statement of claim to introduce a new claim. In that case, the defendant acted on behalf of a number of corporate entities (including X and Y (X's parent company)) to obtain indications of interests from possible lenders (including the plaintiff) for a bridging loan to purchase an oil rig. The plaintiff and X entered into a term loan agreement, which was guaranteed by Y, pursuant to which moneys were provided to X for payment of the deposit for the oil rig and associated expenses. X subsequently defaulted on repayment of the loan. There was no contract between the plaintiff and the defendant, and the plaintiff sought to claim against the defendant in unjust enrichment to recover the advisory fee received by the defendant on the basis that there had been a total failure of consideration. The advisory fee was paid to the defendant directly by Dvergsten and/or Y out of the loan which the plaintiff had extended to X.

25.10 The High Court (General Division) held that the new claim...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT