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What is Unjust Enrichment?

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If your business falls into a business dispute, there are many factors you need to know. In addition to understanding the various ways you can potentially resolve a commercial conflict, such as alternative dispute resolution (ADR), it is helpful to understand what happens during commercial litigation, such as unjust enrichment. One point to know is that a court could find that unjust enrichment against the claimant’s expense has occurred as part of the business dispute. This will be due to an unfair factor. This article will explain the definition of unjust enrichment.

Definition

Unjust enrichment is a common law action that you can apply to more than just commercial litigation. It is a relatively new area of law first recognised by a court in the UK in 1991. It is where a defendant to court action gets unjust enrichment through an action of the claimant. 

Enrichment can be either positive or negative, meaning it can be receiving a benefit or stopping the other party from spending money unnecessarily. It is important to note that unjust enrichment is not about what the claimant has lost in the case but whether their loss results in the defendant’s financial gain. Unjust enrichment will cause an unfair situation between the parties of the commercial dispute. It can often occur due to an error between the parties to the litigation.

An example is when three parties or businesses are in dispute, and one puts money in the wrong party’s account. The business that received the funds fails to return them and is, therefore, unjustly enriched at the loss of the company that made the transfer. 

Another example is when you deliver goods to another business by mistake, and when they receive them, they keep them and do not pay.  

How Can I Tell It is Unjust Enrichment?

There are three elements of a claim that must be present to prove unjust enrichment:

  • that the defendant receives a benefit, so is enriched;
  • that this enrichment is unfair or unjust, and 
  • their enrichment causes a loss to the claimant. 

Once a claimant believes they have all three elements, the next step is for the defendant to have the opportunity to provide a valid defence. If they fail to, a court may find unfair enrichment and consider a remedy

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What Does Unjust Mean?

Part of the elements required for unjust enrichment includes that the financial gain must be unfair or unjust.

There are five main ways a court may find the enrichment of a defendant unjust at the expense of a claimant, which include the following: 

  • a lack of consideration from the defendant for the enrichment they receive;
  • the claimant making a mistake by enriching the defendant;
  • duress, so the claimant is forced to enrich the defendant;
  • the undue influence occurs where the claimant has trust in the defendant, and the latter uses this to their advantage; or 
  • the enrichment is the result of some wrongdoing of the defendant.
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What Are the Relevant Remedies and Defences?

If a court does find that there has been unjust enrichment, the law says that a claimant can obtain a restitution remedy. This is a resolution where the defendant wants to repay the claimant the value they were enriched by. It is possible that a claimant can receive more than this with a remedy, which includes:

  • finding out what the defendant’s assets are;
  • where the defendant has an asset or trust in the claimant that can be identified, the claimant may ask for a declaration of this; or
  • a claim on a right to possession over the defendant’s asset, which you may hear people refer to as asserting a lien.

Potential defences can include:

  • where the enrichment was a valid gift;
  • where the claimant made the enrichment through a legal, equitable or statutory obligation; or
  • where the enrichment was a part of the settlement by the claimant as part of a valid claim. 

Key Takeaways

It is possible in commercial litigation to find that unjust enrichment has occurred. This is where the defendant has benefited at the expense of the claimant. Three main factors need to be present for unjust enrichment to occur: the defendant relies on the enrichment, which is unjust and causes a loss to the claimant. There are elements a court will consider to assess whether the enrichment was unjust, such as the presence of duress or under influence. 

Restitution is the usual remedy, but other remedies exist. However, a defendant can defend a claim by arguing that the enrichment was a valid gift. 

For more information, LegalVision’s experienced disputes and litigation solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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